This article is based on the KPMG Family Business report “Family Matters – Financing Family Business Growth through Individual Investors”.
Our Family Business Global Survey found that family businesses are achieving an interesting balance between running the company with a very strong sense that the family and its welfare is top priority, while still detaching emotion from affecting decision-making.
Of the survey respondents, the majority, 58%, have CEOs who are family members, and yet despite this, only 20% believe that emotions and sentiment within the family should have any effect on decision-making within the business.
All the German family business respondents agreed that it is imperative that family members have a strong sense of belonging within the business, and strive to prioritize the welfare of family members in continuing the family legacy and tradition of the business.
These businesses understand the value in using the family element of the company as its strong foundation, and to ensure at all times that foundation is well-maintained. While on the other hand, to not let the more potentially destructive elements of family relations, such as emotional ties, to impact the day-to-day running and eventually eat away at the strength of the company.
“Even though we are sentimental towards our business, the decision maker is very practical and, based on his authority, cuts off conversations when members go overboard with emotions. Family businesses do their best to perform under stressful conditions and are known to be patient during economic downfalls as they believe in continuing the legacy and making reasonable investments,” stated the managing director of a German family mattress producer.
Only a quarter of German family businesses say that the current economic climate has influenced the ability to gain finance for projects, providing potential for high-net-worth individuals (HNWIs) to fill the gap.
“In Germany, there is a long tradition of interest and engagement between individual investors with a family business background and other family businesses. We have noticed an increase in this interest recently. To bring both sides to one table and to be involved when they jointly engage for the prosperity of the family business – this brings real satisfaction.” – Christoph Kneip, Managing Partner, Family Business, KPMG in Germany.
Half of German HNWI respondents have previously invested in family businesses, and all were positive about the partnerships.
One HNWI – the CEO of a German industrial equipment supplier – explains: “I was issued equity as well as interest in parts for my investment, and I was just looking at debt and not equity and was delighted when I got to know of the distribution.”
Six out of 10 said they prefer to pursue reasonable risk with reasonable returns and the same proportion also expressed some interest in investing in family businesses.
Another HNWI explains his preference for family businesses as investment opportunities: “Family businesses seem to be more organized as the decisions are never challenged as part of the agreement. They seem to be having more financial hold as there are many contributors at a single time and all work as a team when it comes to supporting business.”
The responses received from both HNWIs and family businesses in the KPMG Family Business Global Survey are pleasingly symbiotic, showing that family businesses are able to gain the financing they require, without the fear of losing control or independence.