Family matters – Kommersant FM

Family business as an institution may disappear along with its founders. It turned out that many entrepreneurs have no one to leave their business as an inheritance. The study was conducted by The Economist magazine. According to him, some do not have children, others do, but they do not plan to develop the parent company. There is very little time to find a solution: every fourth businessman, according to the authors’ estimates, is over 65 years old. The problem is relevant for Europe, the USA and Japan, the publication clarifies.

At the same time, private business in many countries is the basis of the economy. In Germany, for example, 40% of all companies traded on the stock exchange are family owned, said Kommersant FM’s own correspondent in Berlin, Andrei Urban: “In many family firms in Germany, as well as throughout the Old World, there are simply no heirs, who would take the helm into their own hands. This situation is very unfavorable in an economic sense, since thousands of German companies may simply close down in the coming years.

The German National Development Bank warns that by 2026, 560 thousand medium-sized enterprises – and there are 4 million of them in the country – may be decapitated, in the sense that there will simply be no one to replace the general director. Overall, over the past 20 years, the proportion of business owners over 60 years of age has increased from 15% to 31%. Only every tenth company manager in Germany today is under 40 years old.

According to economists at the Development Bank, in the near future, almost every fourth family enterprise in the country will face problems of transferring management into the hands of a worthy heir.

The managers of almost 80% of enterprises throw up their hands and admit that they simply cannot find a replacement for themselves.”

In the Russian Federation, family businesses began to appear only after the collapse of the USSR. According to Deloitte data for 2021, the average age of most such firms in Russia is about 20 years. Mostly they are still led by the founders or heirs from the first generation. And, given the Russian business climate, the process of transferring cases causes a lot of anxiety, shared individual entrepreneur from Astrakhan Rustam Shabanov, who is trying to manage a family construction company:

“When my father retired at 60, he transferred all the shares to me. Since I was three years old, I traveled with him to all these construction sites – both residential buildings and industrial facilities. We went through the nineties, the crisis of 2008, and 2014. There were bandits and fights. It was very difficult during the COVID-19 pandemic, we had to close our small business, and since then we have been working as individual entrepreneurs. Of course, I reduced my business a little; I had to sell equipment and let people go. My father had a team of 150 people, and now there are five employees.”

Nevertheless, involving relatives in work is one of the popular solutions in Russia. According to estimates by the Chamber of Commerce and Industry, 74% of the country’s medium and small businesses can be called family companies. There are fewer such examples in large businesses. The brightest of them is the Safmar holding, which was founded by billionaire Mikhail Gutseriev. Now his brother and son work in different positions in the group’s assets.

Meanwhile, for billionaires, the closeness of family to business is rather a threat, says Elena Volchek, senior lawyer at the RKT consulting group: “The richer a person is, the more assets he has, the more heirs and ex-wives he has. This can be seen in some key cases of inheritance-corporate disputes.

In each of them, a hereditary-corporate conflict occurs when the spouse, her dependents and other heirs share some expensive asset. Large businesses in Russia were acquired by serious people in the 1990s during privatization.

More than 30 years have passed, and, of course, they are all aging, so the main focus now is on these companies. Most heirs prefer to sell shares somewhere on the market, to some investors.”

Potential conflicts could not be avoided even if a will was made. According to Russian laws, minor children always claim a share in the assets, even if the entrepreneur wants to transfer the business to someone else.

In this case, a personal fund will help, which will provide the desired circle of heirs with passive income, managing partner of FTL Advisers Natalya Patseva shares her experience: “This is a much more flexible instrument than a will. Almost any conditions can be sewn into it. For example, we had experience when a business owner wanted his asset, which he had been creating all his life, not to fall into the inheritance estate. At the same time, he has blood children.

Our client simply did not want his business to be sold or divided as a result of family troubles or some mergers that he did not want to allow. For such situations, of course, personal funds are suitable. At the same time, the input for creating such a fund is 100 million rubles.”

A fairly simple but effective way of selecting successors was found in Japan. One of the companies has created an algorithm for selecting a buyer for any family business. The service turned out to be in demand: as The Economist writes, many businessmen in Japan are already over 90, while the value of their companies exceeds $3.5 million. Artificial intelligence did it almost flawlessly. On average, it takes consultants about a year to conclude a deal, but the algorithm reduced this period to three months, and the record was a purchase in 1 hour 26 minutes.

---

Everything is clear with us – Telegram channel “Kommersant FM”.

Svetlana Belova