European Family Business Barometer: Setting the pace for growth

Second edition European Family Business Barometer Setting the pace for growth

Findings

June 2014

www.kpmg.com/familybusiness

1 © 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

Contents

Page

Selected findings from the survey

■ Confidence: How do you feel about the economic situation of your family businesses for the next six months? 2

■ Confidence: The previous six months 3

■ Challenges and concerns: What are the major issues facing your family business right now? 4

■ Investment strategy: Does your strategic plan include any investments or divestments? 5

■ Investment strategy: Are you thinking about investment opportunities? 6

■ Investment strategy: Why doesn’t your family business sell to foreign markets? 7

■ Access to finance: In the last six months, has your family business experienced difficulties in accessing finance? 8

■ Financing: Which of the following options do you consider the most attractive in the next six months? 9

■ Regulatory environment: What changes/improvements would you welcome most? 10

■ Family business strategy: What would you consider to be the top 5 key strengths of your business? 11

■ The future for family business: Importance of family issues for the business 12

■ Family business strategy: Are you considering any options for your family business over the next 12 months? 13


Confidence: How do you feel about the economic situation of your family businesses for the next six months?

• Confidence in market conditions is rising and visible from the survey results

• Those reporting confidence rising has increased from 54% to 71% - a double digit swing

• 21% of respondents feel unable to commit to a future outlook – a 13% drop on December 2013

• All signs point to market confidence returning but a war on talent is visible in the background

• Increase in confidence attributed to changing funding landscape

• Willingness to re-invest profit and ability to secure bank funding on the rise


Confidence: In the previous six months, your company has:

• 49% of respondents indicated that they are maintaining the size of their workforce compared with 36% in 2013 – a recognition that a skilled appropriate workforce is essential to business success

• Decreases in turnover and staff numbers have reduced from 31% to 24% and 23% to 11% respectively

• 72% indicated that they are engaged in activities abroad an increase on the 60% registered in December 2013

• 75% of respondents indicated that they are planning strategic investments


Challenges and concerns: What are the major issues facing your family business right now?

• Top 5 issues are declining profitability, changes in regulation/regulatory framework, war on talent, legal/political uncertainties and increased tax rates

• 49% of respondents have classified declining profitability it as their biggest challenge compared with 38% in 2013

• War for talent and changes in regulatory framework remain neck and neck albeit both increasing in importance to the second biggest concern with a swing from 23% (2013) to 36% (2014)

• Attracting the right people with the right skills is becoming an increasing challenge and may require intervention.

• Decreasing turnover ranks seventh with only 18% of respondents indicating it as a key concern whereas six months ago it has been the biggest challenge (52%)


Investment strategy: Does your strategic plan include any investments or divestments?

• 75% of respondents are planning investments as part of their strategic plan

• Only 3% of respondents are planning divestments – a large decrease from 11% reported in December 2013

• Trend for investing is an indicator of confidence in the future

• Internationalisation is still a largely unexploited opportunity for family businesses

• 2% decrease in respondents planning to invest in internationalisation - a reluctance to fully embrace foreign markets as an opportunity

• Increase in investments planned for core business from 52% to 55%


Investment strategy: Are you thinking about investment opportunities?

• 75% of respondents are considering future investments

• 41% of respondents will be investing in their home country

• 19% will be looking to other European countries

• Familiarity with markets mitigates risks associated with investments

• Countries deemed most attractive include Africa and Oceania which have increased in attractiveness from 7% to 11% and 1% to 3% respectively

And if so, where?


Investment strategy: Why doesn’t your family business sell to foreign markets?

• During the last six months, respondents indicated a decrease in undertaking activities abroad

• Of the 75% considering future investments only 27% were considering internationalisation

• Growth from internationalisation remains largely untapped but markets abroad offer a growth opportunity

• 40% of respondents said they are still not engaged with foreign markets

• 35% of this group attribute their decision not to engage or invest in foreign markets due to lack of familiarity

• Only 2% attribute their decision to lack of funding


Access to finance: In the last six months, has your family business experienced difficulties in accessing finance?

• Access to finance can be a key issue and growth inhibitor for family businesses but the market for securing finance has stabilised

• 81% (compared with 51% six months ago) have indicated that accessing finance is not an issue

• Only 19% (compared with 49% six months ago) indicated that they are still experiencing difficulties accessing finance

• Of those struggling to access finance, 35% are experiencing difficulties making new investments

• A fifth of family businesses are still affected by funding issues


Financing: Which of the following options do you consider the most attractive in the next six months?

• 37% of family businesses are using their own equity to finance business growth

• Desire to remain independent and in charge of their future is driving willingness to re-invest profit

• 36% of respondents indicated bank financing was most attractive form of funding

• Traditional forms of financing remain the most popular


Regulatory environment: What changes/improvements would you welcome most?

• A key challenge is the tax treatment of the inter-generational transfer of the family business

• 45% of respondents would like to see concessional tax arrangements for inter-generational family business transfers (a rise of 30% on 2013)

• 52% ranked simplification of the tax rules and a ‘fairness’ to the approach as the change they would welcome most

• Tax related issues appear three times in the top five changes/improvements called for


Family business strategy: What would you consider to be the top 5 key strengths of your business?

• Top 5 strengths identified by family businesses are 56% ability to win business or customer loyalty, 49% employee loyalty and commitment, 44% strong brand or market presence, 42% customer service, 39% private ownership

• Private ownership has increased in importance from 10% to 39% putting it into the top 5 strengths

• The rising importance of the family element is indicated by the importance placed on private ownership and shared values and ethos


The future for family business: Importance of family issues for the business

• Family businesses are driven by a series of critical success factors

• Maintaining control of the family business, good governance structures and communication between generations continue to rise in importance as influencers

• 87% indicate the maintaining family control is a key success factor

• 86% recognise the good governance structures and processes are also key contributors to success

• Comparing the results of this survey with 6 months ago, some interesting trends appear:

Communication between generations has increased from 63% to 85%

Balancing family concerns and business interests has increased from 59% to 81%

Informing family of business issues has increased from 53% to 73%

• The influence of family values on the business is hard to ignore


Family business strategy: Are you considering any options for your family business over the next 12 months?

• 49% of respondents indicated that they are considering a strategic change in business operation during the next 12 months (an increase on the 29% in 2013)

• 93% of this group plan on keeping the business in the family

• Only 7% plan on selling

• Highlights of the business strategy include 27% plan to pass on control/governance; 23% will transfer ownership; 21% will pass on management of the business; and 21% will seek to appoint a non-family CEO but retain family control


Methodology

The European Family Business Barometer is based on the results of an online survey. In total 710 completed questionnaires were received from EFB members during the period 31 March 2014 to 4 May 2014.

This is the second survey of its type to be conducted measuring trends among family businesses.

The responses from the following countries have been analysed:

• Austria

• Bulgaria

• Cyprus

• Finland

• France

• Germany

• Greece

• Hungary

• Ireland

• Luxembourg

• Malta

• Poland

• Portugal

• Slovakia

• Slovenia

• Spain

• The Netherlands

• UK


Country contacts

Christophe Bernard Partner, Global Head of Family Business T: +33 (0) 1 5568 9020 E: [email protected] Austria Yann-Georg Hansa Partner, KPMG T: +43 (0) 1 3133 2446 E: [email protected] Bulgaria Emmanuel Totev Partner, KPMG T: +359 (0) 52 699 650 E: [email protected] Cyprus Demetris Vakis Partner, KPMG T: +357 22 209 000 E: [email protected] Finland Ari Engblom Partner, KPMG T: +358 (0) 20 760 3614 E: [email protected]

France Jacky Lintignat Partner, KPMG T: +33 (0) 1 5568 9036 E: [email protected] Germany Dr. Christoph Kneip Partner, KPMG T: +49 (0) 211 475 7345 E: [email protected] Greece Christian Thomas Partner, KPMG T: +30 21 11 815 815 E: [email protected] Hungary Zoltán Mádi-Szabó Senior Manager, KPMG T: +36 1 88 77 331 E: [email protected] Ireland Colin O’Brien Partner, KPMG T: +353 (0) 1 410 1679 E: [email protected]

Olivia Lynch Partner, KPMG T: +353 (0) 1 410 1735 E: [email protected] Luxembourg Gilles Poncin Director, KPMG T: +352 22 51 51 7230 E: [email protected] Malta Jan Grech Director, KPMG T: +356 2563 1037 E: [email protected] The Netherlands Olaf Leurs Partner, KPMG Meijburg & Co T: +31 (0) 76 523 7514 E: [email protected] Robert Kohler Partner, KPMG T: +31 (0) 20 656 7361 E: [email protected]

Poland Miroslaw Grabarek Partner, KPMG T: +48 22 528 1091 E: [email protected] Portugal Vitor Ribeirinho Partner, KPMG T: +351 21 011 0161 E: [email protected] Slovakia Rastislav Begán Director, KPMG T: +421 (0) 2 5998 4612 E: [email protected] Spain Juan Jose Cano Ferrer Partner, KPMG T: +34 914 563 818 E: [email protected] UK Gary Deans Partner, KPMG T: +44 (0) 141 300 5811 E: [email protected]

Thank you

To download the European Family Business Barometer – Setting the pace for growth report, please click here.

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© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International Cooperative (KPMG International).

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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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European Family Business Barometer: Setting the pace for growth