Generation game

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WARNING SIGN: Ammar Al-Khudairy says that Gulf family firms must restructure.

Family-run firms account for 75% of businesses across the Gulf and their patriarchs are getting old. But is the next generation ready to take over the reins of power? Andrew White reports on the Gulf region's family emergency.

The Zamil Group has defined industrial investment in Saudi Arabia for over three decades, as the 12 sons of its founder have built upon his legacy, establishing a business empire that encompasses everything from glassmaking to shipbuilding.

Next year that era of family-dominated investment will come to an end, as the group prepares to sell shares to the public across some of its operating units.

It is a trend that is set to be played out across the Gulf as some of the biggest family trading groups - representing over 75% of all businesses in the region- look to the future and the accession of a new generation of leaders to take the reins.

"When we talk about a family business, it is not any more like before - small shops and trading houses," muses Dr Abdulrahman Al Zamil, chairman of Zamil Group Holding Co, today a far cry from the company first founded by his father back in the 1930s.

"The family business in the Gulf is becoming a conglomerate, a national institution that affects the national economy," he continues.

"Some of them have reached international level, and these family businesses cannot afford to continue to operate under the old regime."

At stake is the foundation of the region's economy as studies have shown that seven out of 10 family businesses fail to make the transition to the second generation, and only one in 10 makes it to the third generation.

Currently, only 5% of family businesses survive the third generation, due in large part to a lack of strong succession strategies.

The notion of 'regime change' will certainly shape the future of Zamil Group as it starts selling shares in some of its units to the public from 2009.

While Zamil Group retains stakes in more than 60 companies in 55 countries, the Saudi public will soon snap up significant stakes in one of the kingdom's most prominent family firms.

"It is one of the biggest issues the region faces today," insists Mohammed Al Fahim, honorary chairman of Abu Dhabi-based Al Fahim Group, one of the UAE's largest family business groups.

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