Family Office

Family Businesses Deserve More Love – KPMG

Tom Burroughes, Group Editor, 20 June 2022

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We talk to the accountancy giant about the work its experts have done in tracking the needs of family businesses and the structures set up to handle intergenerational wealth transfer and succession.

Family businesses achieve long-term success but their contribution to the global economy too often falls under the regular media and policymaking radar, according to KPMG, which recently issued a report on the space.

Some 35 per cent of global gross domestic product is in the hands of family-run firms, Tom McGinness, global leader, family business, KPMG Private Enterprise, KPMG International, told this news service in a call.

“It doesn’t get the level of coverage that listed companies do. It is time to explode some of the myths about family businesses. They are incredibly agile and innovative; they are attractive to employees going forward and have a clear sense of purpose,” McGinness said.

Government policy, not just covering tax, needs to be focused on encouraging such business, he continued. For example, policies to encourage family-owned businesses could be part of the UK and other governments' so-called “levelling up” agendas.

In May, KPMG Private Enterprise and the STEP Project Global Consortium issued a report saying that family businesses' secret to success lies in their emotional attachment to the firm as well as the ability of next generation family members to experience life outside the business and take risks. The Global Family Business Report brings together insights from 2,439 CEOs and other leaders from top family businesses across 70 countries and territories, illustrating the common factors that make up the formula for family business – resilience and regeneration.

When the older generation retires and moves away from a firm, some families are selling, cashing in on their business and creating family offices. They have concerns such as rises in capital gains taxes – some business exits have been timed to avoid potential rises in the future, McGinness said.

“As they hand [over] to the next gen, that generation has different values,” he said, citing interests such as ESG. “They may want to take a business in a different direction. For example, if the original business was in fossil fuels, they will want to remove it from that [area].”

"There has been a rise in focused family governance and searches for solutions, and for things such as a constitution framework. A lot of that is driven by trying to mitigate risks,” he said. Risks include areas such as liquidity.

McGinness described how family-owned firms can often be less visible than public companies with no family control, even though they collectively wield a lot of business and economic muscle.

Discussing other details, McGinness said he was disappointed at the low percentage (19 per cent) of women in CEO roles. “The diversity and inclusion agenda is something that needs to be revised,” he said.

Family businesses planning for the future need to consider diversifying their product and service lines, and entering new sectors in order to be more diversified, he said. Importantly, families can help younger members by entrusting them with seed capital to start new firms and remain part of a wider family network.

(An earlier version of this news article ran on WealthBriefing, sister news service to this one.)

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