Family business owners in Asia are keen to maintain their legacy and wealth across future generations, but few are actively preparing for succession, according to a report released by HSBC Global Private Banking today.
These include people who are themselves second- or third-generation owners. This gap between intention and reality is particularly apparent compared with western markets.
HSBC report, “Family-owned businesses in Asia: Harmony through succession planning” found that worldwide, 78% of entrepreneurs would like to keep their business in the family. However, over half (52%) have not planned for this future.
Asian business owners lag even further behind, with approximately two-thirds of respondents from mainland China, Hong Kong and Taiwan not having planned for how their businesses might continue after them.
Lok Yim, regional head, global private banking, Asia Pacific, HSBC, said: “It is important to consider the value of family-owned businesses as a part of the global economy. Acknowledging this means accepting that we are now in the depths of a record transition of businesses between generations, or to new management.”
Yet, there are country differences within Asia Pacific.
India has the highest percentage of entrepreneurs who intend to pass their business on to a family member, with 79% intending to do so, which puts Indian business owners on a level with their counterparts in the UK (77%) and Switzerland (76%).
However, fewer than half of the respondents in Hong Kong share this intention (44%), along with just 56% in mainland China and 61% in Taiwan.
In fact, entrepreneurs in mainland China (25%), Hong Kong (29%) and Taiwan (27%), and, to a slightly lesser extent Singapore (22%), show the most interest in selling their business as the exit route of the 10 surveyed markets.
The sector most favoured for sale globally is electronics (21%), a sector in which Asia accounts for almost two-thirds of world exports.
Although families in Asia are planning for succession less than their global counterparts, they increasingly recognise the need to formalise their wealth structures.
Edith Ang, head of family advisory, Asia Pacific, HSBC Global Private Banking, commented: “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.”
This varied appetite for selling businesses may be connected to the experience of respondents who themselves inherited the family business, according to the report’s findings.
Among the second- and third-generation entrepreneurs surveyed, almost 60% of respondents in mainland China say they felt a sense of obligation to take on the family business, compared with 7% in India.
“Nevertheless, many multi-generational entrepreneurs across the region feel supported by older generations in the family,” said the report.
In Singapore, this stands at 83%, and even in Taiwan, which sits at the bottom of the Asian pack, it still remains high at 70%.
