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Dubai: Lack of a succession plan could ruin family-owned businesses in the UAE and the Gulf, analysts warn, many of which have seen unpleasant and painful splits in recent years.
Most Gulf companies are either run by first and second-generation businessmen, while a smaller per cent have entered into the third generation, getting split based on family hierarchy and relationship.
Building a workable succession plan for family businesses is not a "quick fix" solution to the underlying challenges that are facing family business leaders in the Middle East looking to survive the third generation, says Kelin Gersick, an acclaimed family business guru.
"Some families that come to us are experiencing difficulties primarily in their family relationships, others in their operating businesses. Still others are most concerned with ownership and shareholder issues," Gersick said.
About 90 per cent of the UAE's nearly half a million registered businesses are individually or family owned. Small and medium size businesses (SMBs) represent more than 80 per cent of the legal business entities.
However, the succession problem is very significant among large business houses with large asset class. "We believe that it is not possible in a family enterprise to bring about meaningful, lasting change in one of these areas without taking into account the others. For that reason, in our approach to consulting, we always consider the client's whole 'system' - family, business, and ownership."
While most succession disputes are usually home-managed, some spilled over to arbitration while others were sorted out through legal means.
Intervention
Instances are also not rate, where the government leaders help mediate in the division of assets.
The problem is not only exclusive to the national family owned businesses. It is also present among expatriates.
During the last decade, a number of Indian-owned retailers have split their assets and businesses and rebranded.
"With recent reports suggesting that more than 75 per cent of businesses in the Middle East being family-owned, and only five per cent surviving in the third generation, this is a critical issue that needs to be addressed today," says Purva Hassomal, organiser of the Family Business Forum, scheduled to be held later this month.
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