Generation game

zoom

WARNING SIGN: Omar Bitar says that Gulf family firms must restructure.

"Family businesses are very powerful, they hold a lot of interzests, and as they come to the end of the first generation they must safeguard their business for the second and third generations," he continues.

It's more urgent today than it was 10 or 20 years ago - the cycle of life means that if they don't do something about it now, nothing will be done, jeopardising the interests of the consumer and the family businesses themselves.

While the issue is an emotive one, it is also vital to the future of the Middle East business community.

If the succession issue is not handled with the utmost care and consideration, then Gulf family business leaders risk undoing decades of achievement.

"The first generation can be one or two people, then they have children, who in turn have children - and then it goes all over the place," warns Omar Bitar, managing partner, Business Advisory Services, at consultants Ernst & Young.

"Unless the business goes through comprehensive succession planning, it will be unable to deal with the issue of who should be running the company from one generation to another in a professional manner," he continues.

"Problems start coming up, and you end up breaking the business."

In order to survive the transition, Gulf companies are increasingly turning to private equity (PE) firms to guarantee their long-term futures.

There are two common scenarios: the first that the inheritors are disinterested and looking to cash out; the second that one or more inheritors remain dedicated to the business, while his or her siblings are eager to sell.

"You can't have four successive generations owning the business, because then you get something like 400 people trying to run things," Ammar Al-Khudairy, CEO of PE firm Amwal AlKhaleej, tells Arabian Business.

"When you have real businesspeople and then a host of trust fund-type inheritors, there is invariably a dichotomy in the interests - one guy wants to keep all the profit in the company and plough it back into the business, while his sibling wants 100% distribution of profits so he can buy that boat," he continues.

"It causes a lot of family friction and disintegration of business."

Among senior-generation family business leaders the concern is twofold: that their children will not be prepared for the leadership responsibilities that a successful family enterprise demands, or that family conflicts will arise that threaten harmony and ownership continuity.

"A lot of our deals come when you have a couple of brothers, and one just wants a few million dollars to go and live in Nice or Cannes," says Al-Khudairy.

Print | Email | Discuss this article

| Share |

READERS' COMMENTS

Mohi Din BinHendi and his succession plan
Posted by Philippa Taylor, Melbourne, Australia on Monday 20 October 2008 at 03:17 UAE time

I wonder if Mohi Din BinHendi has ever heard of Family Business Australia? Here in Australia, an organisation grew out of exactly the issues discussed in the article. Members meet in a confidential environment to share with and learn from each other. Programs are run to prepare the Next generation for leadership, and to assist the selection of the next leader from a sibing group or `cousin consortium'.

Click here to post a comment

Add your Comment All posts are sent to the administrator for review and are published only after approval. ArabianBusiness.com reserves the right to remove any comment at any time for any reason. Please keep your responses appropriate and on topic. Arabian Business would like to point out that only comments relevant to the story will be published. Any containing personal insults or inappropriate language will not be approved.
Name *
Remember me on this computer
Email *	(Your email address will not be published)
City
Country
Subject *
Comment *
Notify me of further comments
Enter the words above *
Please click post only once - your comment will not be published immediately.

MORE FROM ARABIANBUSINESS.COM