HSBC Global Private Banking has released a new report entitled “Family-owned businesses in Asia: Harmony through succession planning” which analyses how prepared family-owned businesses in Asia are for the future of their businesses and their wealth. 

Seventy-eight per cent of entrepreneurs globally would like to keep their business in the family, but almost half of them (52 per cent) have not planned for this future, according to a new report by HSBC Global Private Banking.

Asian family business owners lag further behind, with about two-thirds of respondents from mainland China, Hong Kong and Taiwan not having planned for how their businesses might continue after them.

India has the highest percentage of entrepreneurs who intend to pass their business on to a family member, with 79 per cent intending to do so, which puts Indian business owners on a level with their counterparts in the UK at 77 per cent and Switzerland at 76 per cent, the report shows. However, only 44 per cent of the respondents in Hong Kong share this intention, along with 56 per cent in mainland China and 61 per cent in Taiwan.

The findings are based on research conducted by Ipsos UK on behalf of HSBC among 1,798 high net worth business owners with at least $2 million of investable assets. The research was conducted online in mainland China, France, Hong Kong, India, Singapore, Switzerland, Taiwan, the UAE, the UK and the US.

With banks such as HSBC seeking to engage with family-run firms, helping them to manage succession planning, capital-raising, IPOs, and other topics, the report's findings show that banks have potentially lucrative work advising business owners.

Exits
As for exit strategies, 25 per cent of entrepreneurs in mainland China, 29 per cent in Hong Kong and 27 per cent in Taiwan, plus 22 per cent in Singapore, show the most interest in selling their business of the 10 surveyed markets. The sector most favoured for sale globally is electronics (21 per cent), a sector in which Asia accounts for almost two-thirds of world exports.

This varied appetite for selling may also be connected to the experience and motivations of respondents who themselves inherited the family business. Among the second- and third-generation entrepreneurs surveyed, almost 60 per cent of respondents in mainland China said they felt a sense of obligation to take on the family business, compared with 7 per cent in India.

Nevertheless, many multi-generational entrepreneurs across the region feel supported by older generations in the family. In Singapore, this stands at 83 per cent and, even in Taiwan, which sits at the bottom of the Asian pack, it remains high at 70 per cent.

Although families in Asia are planning less for succession than their global counterparts, they increasingly recognise the need to formalise their wealth structures, the report reveals. The importance of succession planning for family businesses in Asia is also underscored by their economic contribution. These enterprises account for about 79 per cent of GDP in India, one of the highest ratios globally, and around 50 per cent of GDP in mainland China, dominating the private sector. 

“There is importance attached to legacy, but not necessarily to keeping the business in the family. HSBC’s report found that, despite wanting and trusting the next generation to carry on the family business, many Asian entrepreneurs recognise their children may have different aspirations and a significant proportion are open to them exploring these,” Lok Yim, regional head, global private banking, Asia Pacific, HSBC, said.

“Asian entrepreneurs and their families can better prepare for the future by embracing a dynamic, forward-thinking approach to extending business longevity and protecting wealth,” Edith Ang, head of family advisory, Asia Pacific, HSBC Global Private Banking, added. “Having these conversations early allows family members to clarify their expectations, professionals working alongside to develop a deeper understanding of the family. Everyone benefits from adequate time to learn and grow into roles.”