MYTH VS REALITY
- Family businesses are small
- Less professional than non-family firms
- Family firms constitute a major proportion of business in most developing countries
- Family executives, especially the ones beyond the generation of the founders are educated and qualified to lead a business or managed in a professional manner
- Family owned enterprises will account for 40% of the world’s largest firms by 2025 (The Economist)
- 95% of the companies in Indonesia is owned by families, with a total revenue of +/- US$ 5-10 million (PWC 2015), and a total wealth reaching US$ 134 trillion (PWC 2014), or about 25% of Indonesia’s GDP
- Indonesia’s family businesses are still typically controlled by the 1st or 2nd generation
- 60% of the listed companies in South East Asia are family offices, and the leadership legacy is considered as one of the companies’ priorities
- A few examples of successful family businesses in Indonesia :
- Lippo group
- Djarum group
- Kalbe Farma
- Sampoerna group
- Blue Bird group
- PAN Brothers
Family Businesses as a % of total listed companies > USD 50 Million Market cap
- A 2011 study conducted by Credit Suisse Research Institute of 3,568 publicly listed family businesses in 10 Asian markets with market capitalization of over USD 50 million finds that family businesses are the backbone of the Asian economies, as they represent about 50% of all listed companies in the study universe. (See the table on the left.)
- They have a relatively short equity market history compared with -their peers in Europe and the USA. 38% or 1,371 of the family businesses reviewed were listed only after 2000. This should be largely attributable to the much more early stage of their life-cycles and the less-developed capital markets in the Asian region.
- In Asia, many family businesses are first generation businesses, in contrast with many family businesses in Europe and the USA, which are already in their fourth or even fifth generation.
- Between 2000 and 2010, family businesses outperformed their local benchmarks in seven out of the 10 Asian markets, among which family businesses in China, Malaysia, Singapore and South Korea achieved the strongest relative outperformance against their local benchmarks in terms of compound annual growth rate in total return.
- Throughout the last decade, Asian family businesses also delivered a higher average dividend yield spread of 22 basis points over the market‘ average over the past decade, except in 2002 during the internet bubble crisis
- Only 13% of family firms make it to a third generation and it’s usually caused by family issues rather than business issues While 77% of the Next generations surveyed by PWC are looking forward to running the business one day as many as 60% of the transitions between generations fail and one of the biggest reasons for this being lack of communication