BUSINESS SUCCESSION PLANNING
The business succession planning issue in Australia is not about to go away – in this year’s Family Business survey the age of owners managers shows 29 % of owner / managers of family owned SME’s are over 60 years and a massive 70 % are over 50 years old.
Further analysis of the data provided in the recent 2010 MGI family and private business survey highlights an interesting challenge for business owners – like the remainder of the population the age of the actual businesses is also increasing and approaching “retirement:”
| Age of businesses | % |
| 1-24 yrs | 49.1 |
| 25-49 yrs | 34.5 |
| 50-74 yrs | 9.1 |
| 75-99 yrs | 3.0 |
| 100 and over yrs | 4.3 |
Interestingly though retirement planning for businesses (and not just their owners) is not on the horizon, in our work with clients overwhelmingly business owners primary outcome is for the business to continue on after them (and therefore not retire). Yet when the survey is analysed in more depth - the most critical issues facing family businesses – the vast majority are succession related – as would be expected as the age of the businesses and their owners is approaching “retirement:”
| Communication between family members | 39.7 |
| Letting go of leadership/ownership control | 39.7 |
| Providing liquidity for family owners to exit | 36.7 |
| Securing adequate capital for growth and retirement | 34.2 |
| Choosing a suitable ownership structure for next generation | 29.1 |
| Selecting a leadership successor | 25.3 |
| Family conflict management and resolution | 21.9 |
| Developing effective processes for shared family control | 13.9 |
| Expectations of family owners not active in the business | 7.6 |
| Controlling factional orientation of family branches | 2.1 |
This data clearly shows the lack of focus on business succession, exit planning, ownership transition planning and retirement planning has led to a large number of challenges – which combined with a rapidly approaching retirement / exit can lead to significant frustration and often an exit strategy that does not maximise business or retirement value.
This has been highlighted just this week in an announcement from the SEC in the US – In the past the SEC has supported the exclusion of shareholder proposals calling for succession planning transparency. Corporate Boards have been able to Rely on Rule 14a-8(i)(7) to exclude this type of information in the proxy. (Rule 14a-8(i)(7) allows corporations to exclude information relating to the day to day management of the workforce.)
Shareholder proposals for strategic succession planning are now getting support from the SEC. The SEC has changed its stance of classifying succession planning as part of the day to day operations. Succession Planning is now considered a risk item that needs to be addressed.
Sydney Office:
