Middle East HNWIs can strategically invest in ... | KPMG | OM

Middle East HNWIs can strategically invest in regional family businesses

Middle East HNWIs can strategically invest in ...

According to leading global tax, audit and advisory services firm KPMG, nearly 60% of the world’s family run businesses are struggling to find external finance to fund investment with 58% of family businesses currently seeking external financing to fund their investment plans.

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  • Nearly 60% of families-run businesses globally are struggling to find external finance
  • KPMG identifies HNWIs as a highly underutilized route for investment
  • 60% of HNWIs globally are seeking investments with reasonable risks and returns
  • The top priorities of HNWIs and family owned businesses align, making this underutilization surprising

Dubai, September 2014: Despite family businesses creating more than 70% of global GDP, many say they find their fundraising options limited and finding the right strategic investment partner can pose a challenge.

Fawzi AbuRass, Head of Family Groups - KPMG Lower Gulf said: “Most successful family businesses are built over successive generations during which time the family's control and leadership of the company becomes complete. Today, many family businesses acknowledge the need for outside influence and this usually leads to the incorporating of non-family members into the company board but the struggle to find external funding from HNWI still remains.”

KPMG has identified one possibly underutilized route for investment with the involvement of high-net-worth individuals (HNWIs), many of whom have family business experience as well as significant investment capital. It is estimated that there are up to 14 million HNWIs around the world with around $53 trillion of wealth, a significant number of which are based in the Middle East.

According to the Survey, the top priorities of HNWIs and family owned businesses align, making this underutilization surprising. HNWIs name long-term capital appreciation (37%) as their top driver for investment, while family businesses name long-term orientation towards investment returns as their top investor characteristic (23%).

“This report has revealed some important misconceptions on the sides of both family members and HNWIs. Education and awareness on the potential benefits of partnerships has emerged as the first and key step to break down some barriers,” Christophe Bernard, KPMG’s Global Head of Family Business explained.

He added, “Private equity funding often requires the entire business to be sold to maximize value in the event of an exit, and corporate strategic partners often see any investment as part of a longer-term plan to secure full control. As a result of these limitations, many family businesses may not be maximizing their growth potential. While there are challenges on both sides, we believe that family businesses and HNWIs have an appetite for investment and could prove to be highly compatible partners.”

KPMG partnered with Mergermarket to survey 125 family businesses about the types of investment they require, their investors of choice and their previous experience of receiving investment from HNWIs or other family businesses. In addition, 125 HNWIs were surveyed about their investment strategy and how this might align with family businesses.

Key findings of the Survey:

•  44%of HNWIs have previously invested in a family business and the vast majority (95%) say that it has been a positive experience in comparison to their other investments.
  More than three-quarters of survey respondents (76%) say that the family holds a majority stake in the business.
  60% of HNWIs are looking for investments with reasonable risks and reasonable returns, and are focused on long-term capital appreciation. Both of these traits are well matched by investment in family businesses.

                                                  -ENDS-

About KPMG

KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 155 countries and have more than 174,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.

Recent KPMG UAE awards and recognitions

In June 2014, Arij Sheikh of KPMG Dubai won First Place and the Little Prize in the latest ICAEW Chartered Accountant qualification (ACA) exams. He is the first UAE-based student to have won an international prize in the ICAEW exams.
The Little Prize is awarded to the candidate who achieves the highest marks for the taxation paper. The examinations are part of the internationally-recognized ICAEW Chartered Accountant qualification, which is held by over 142,000 professionals across more than 160 countries worldwide.

For media queries:

Annu Walia
Assistant Manager, Markets
T: +971 4 424 8906
M: +971 52 991 0159
E: awalia@kpmg.com

© 2017 KPMG, KPMG LLP and KPMG Lower Gulf Limited, registered in the UAE and member firms of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

The views and opinions expressed herein are the personal opinions of the interviewees and authors based on their personal experience working as Auditors in the industry and do not necessarily represent the views or opinions of KPMG International or any KPMG member firm.

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