A Seismic Shift In The Ownership Of Family Businesses Expected Over The Next Three Years: KPMG In Canada Survey
Wednesday, 30 November 2022 12:00.PM
- 'Next gen' leaders are driving digital and ESG changes, while family founders look to secure their legacy through acquisitions and expansion plans -
The new digital realities of today's economy have most Canadian family business owners focused on transition, with nearly eight in 10 (78 per cent) developing a succession plan or expecting to transition the business to the 'next gen' within three years, finds a recent KPMG in Canada survey.
"We are seeing a demographic shift to a younger generation of family business leaders, as a result of the increased reliance on digital technology driven by the pandemic," says Yannick Archambault, National Family Office Leader, KPMG in Canada. "Technology is dramatically shifting the way businesses need to operate and current leaders are increasingly turning to the next generation to lead going forward."
KPMG research, in collaboration with the STEP Project Global Consortium, revealed that family businesses require more transformational leadership going forward. Indeed, seven in 10 leaders surveyed said they believed a more tech savvy generation of leaders was needed to succeed in the future.
"Growing recessionary pressures may further accelerate the pace of this transition as family businesses adapt to new economic realities," adds Mr. Archambault. "Many incoming leaders bring a growth mindset. They tend to have deeper knowledge and exposure to new technologies and innovations and a willingness to integrate social and environmental issues into business planning to make their businesses more resilient and sustainable."
Opportunities in a downward cycle
A significant number of family business leaders also see opportunities for growth in a downward economic cycle. Seven in 10 (71 per cent) plan to raise capital. Nearly six in 10 (59 per cent) have plans to acquire a new business within the next three years and nearly two-thirds (64 per cent) are looking to expand outside of Canada.
"Family businesses that have a strong balance sheet, with cash on hand or access to capital, may consider making acquisitions at more favourable prices, or make the necessary investments to bolster organic growth," says Dino Infanti, National Leader, Enterprise Tax, KPMG In Canada. "This can translate into exciting new opportunities for family businesses to leverage existing and emerging strengths in order to diversify, generate wealth and create jobs."
Lack of succession plans driving some to sell
Not all founders plan to pass down the family business. More than a quarter (26 per cent) plan to sell their business within the next three years.
"The desire to sell may reflect those 'next gen' leaders who are less interested in running the existing family business as they are in managing the family wealth, setting up new businesses or pursuing philanthropy," says Mr. Infanti. "In some cases, the founder may want to sell to fund their retirement plans and to free-up family members to be enterprising in new ways."
Increased focus on ESG
Seventy per cent of Canadian family-owned businesses report having an environmental, social and governance (ESG) strategy, and virtually the same number (69 per cent) believe their ESG programs have a positive impact on the financial bottom line.
Two-thirds (66 per cent) say the drive to increase their ESG commitments is coming from their next generation leaders and employees.
More than six in 10 (63 per cent) say their management pay is now tied to these environmental and social targets. Overall, women are more likely to tie pay to ESG targets with more than seven in 10 (72 per cent) making it a factor compared to only 51 per cent of men.
"Women family business leaders aren't waiting for the environment to change around them," adds Mr. Infanti. "As transformational leaders, they are representative of the changes they want to see in their business, the family and society."
Other Findings:
• 70 per cent of family-owned businesses report having an environmental, social and governance (ESG) strategy
○ 73 per cent of women vs. 67 per cent of male respondents
• 69 per cent have social and environmental targets in their business plans
○ 74 per cent of women integrate social and environmental targets in business planning vs. 63 per cent of men;
• 63 per cent say their management pay is tied to social and environmental targets
○ 75 per cent of women, vs. 51 per cent of men
• 66 per cent of respondents said their 'next-gen' leaders and employees are prompting them to increase their ESG commitments
○ 75 per cent of women owners vs. 57 per cent of men
• 69 per cent of family-owned businesses say their ESG programs positively improve or boost their financial performance
○ 72 per cent of women vs. 66 per centof men
• 66 per cent believe progress on diversity and inclusion is moving too slowly in the business world
○ 70 per cent of women vs. 63 per cent of men
• 92 per cent of women business owners are confident in their company's long-term growth prospects vs. 80 per cent of men
• 89 per cent of women are more confident now than a year ago compared to 72 per cent of men.
SOURCE: KPMG LLP