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Family Business
Succession Workshop
Content
1. Introduction – Vincent Molly
2. European Family Businesses – Jesus Casado
3. Marcel Grosbusch & Fils – René Grosbusch
4. Malta Family Business Act – Nadine Lia
5. Panel debate
• Accountancy Europe – Edelfried Schneider
• Muller & Associés – Jacques Hirtt
6. Q & A
1 Introduction
Business Transfer
1. Introduction 1.1 Insights from Belgium
Source: Lambrecht & Broekaert, 2018
When will the company be transferred?
Management Ownership
Within 5 years 29% 24%
Within 10 years 21% 21%
Not applicable within 10 years 26% 23%
No idea 24% 34%
Business Transfer
1. Introduction 1.1 Insights from Belgium
Source: Lambrecht & Broekaert, 2018
Who will take over (if succession within 5 years)
Management Ownership
To my kids 62% 54%
To external persons 27% 32%
To non-family employees/managers 11% 5%
To my children-in-law 8% 0%
No idea 5% 6%
Biggest Obstacles
Succession planning:
1. Financial reasons (ownership) 2. Family reasons (ownership + management) 3. Economic reasons (ownership + management) 4. Incumbent does not want to hand over (management) 5. Other
1. Introduction 1.1 Insights from Belgium
Source: Antwerp Management School, 2015
Most important advisors (top 5)
1. Accountant 2. Business transfer advisor 3. Notary 4. Lawyer 5. Other entrepreneurs / business owners
1. Introduction
Source: Vlaio, 2017
1.1 Insights from Belgium
Most important issues (top 5)
1. Human aspects 2. Legal aspects 3. Financing aspects 4. Fiscal aspects 5. Valuation aspects
1. Introduction
Source: Antwerp Management School, 2016
1.1 Insights from Belgium
Business Transfer
External Ownership
Family Management
Non-family Management
Family Ownership
Family Management
Family Control
1. Introduction 1.2 Succession Alternatives
How to transfer ownership?
1. Introduction 1.2 Succession Alternatives
Source: Lambrecht & Broekaert, 2018
How will the ownership be transferred (if succession within 5
years)?
Sale 42%
Gift 28%
Not clear yet 17%
Combination of sale/gift 16%
Increasing trend: Search Fund
1. Introduction 1.2 Succession Alternatives
Source: IESE Business School, 2016
Student successors
• 1 out of 3 considers taking over the family business • 63% expects to take over within 5 years at the earliest • The better the performance of the family business, the
higher the intention to become successor in the future • Family harmony > continuity of the business
1. Introduction 1.3 Transfer over generations
Source: Antwerp Management School, 2017
Intergenerational differences
1. Introduction 1.3 Transfer over generations
Source: Molly, 2009
Wealth Preservation
Wealth Creation
The founder’s shadow
1. Introduction 1.3 Transfer over generations
Source: Kammerlander et al., 2015
Strategic change and innovation
• Strategic change: • Conservative • Rebellious • Wavering • External and internal fit
• Innovation: • The young generation as driving force • Co-creation over generations
1. Introduction 1.3 Transfer over generations
Source: Miller et al., 2003
1. Introduction 1.3 Transfer over generations
1. Introduction 1.4 Emotional challenges
Unspoken emotions will drive
business (transfer) decisions
• Typical difficult subjects:
Remuneration, entrance and promotion family members, ownership, treatment of family members
• Deeper underlying emotions:
Feelings of being neglected, need for parental love, lack of trust, favouritism, impartiality
• Importance of communication
1. Introduction 1.4 Emotional challenges
Inheritance taxation
1. Introduction 1.5 Tax and legal challenges
Source: EY, 2017
Hidden taxation
• Capital gains tax (e.g. Austria, Canada, Norway) • Real estate transfer tax (e.g. Austria)
Other
• Gift taxation in Flanders: from 3% to 0% for family firms • Reform of Belgian law of succession
1. Introduction 1.5 Tax and legal challenges
Source: EY, 2017
1. Introduction 1.6 Valuation challenges
Pricing by exit path (discount to estimated market value)
Intended Actual
Sale to other firm 11% 22%
MBI 17% 26-30%
MBO 26% 26%
Sale to family member(s) 50% 42%
Emotional pricing
Source: Kammerlander, 2016
How much is my business worth?
• Overvaluation of the business • Limited insight into business valuation (Vlaio, 2017) • Not actively and timely influencing the factors that impact
business valuation • Flanders (Unizo & Antwerp Management School):
1. Introduction 1.6 Valuation challenges
1. Introduction
Prof. dr. Vincent Molly
Thank you
2 European Family Businesses
Jesus Casado
3 Marcel Grosbusch & Fils
René Grosbusch
3. Marcel Grosbusch & Fils
3.1 Grosbusch today
4 generations
• 1917 • Jean-Pierre
• 1969 • Marcel
• 1975 – 1982 • René – André
• 2012 – 2018 • Lynn – Goy
3. Marcel Grosbusch & Fils
3.2 Grosbusch people in 2018
260
employees
410
suppliers
+ 1800
active
customers
Operating
24/7
3. Marcel Grosbusch & Fils
3.3 Grosbusch international in 2018
Operating in
Luxembourg and
the greater
region
Importing via truck, boat
and air cargo
Many
languages
spoken
Internationl Exports
to other continents
3. Marcel Grosbusch & Fils
3.4 Grosbusch logistic in 2018
Up to more
than 1000
daily
deliveries
40
trucks
56
loading docks
3. Marcel Grosbusch & Fils
3.4 Grosbusch logistic in 2018
400 organics
references
1400
references
18 000 sqm
depot
Maturation
chambers
3. Marcel Grosbusch & Fils
3.5 Grosbusch prepack in 2018
975 000 trays and flow-pack
per year Since 2003
3. Marcel Grosbusch & Fils
3.6 Grosbusch fruit at office in 2018
+70 000 boxes
per year
Since 2008
3. Marcel Grosbusch & Fils
3.7 Grosbusch Fresh’Cut in 2018
134 000 shakers
per year
20 tonnes
per week
Since 2010
3. Marcel Grosbusch & Fils
3.8 Grosbusch Zummo in 2018
Since
2016
3. Marcel Grosbusch & Fils
3.9 Grosbusch Cenrtifications in 2018
9 certifications
3. Marcel Grosbusch & Fils
3.10 Grosbusch news in 2018
Cooking
workshop
Aquaponic
greenhouse
Orchard of
1000 trees
Fruits & Vegetables
mascots
3. Marcel Grosbusch & Fils
3.10 Grosbusch news in 2018
Auditorium Specific training for
fruits & vegetables
professionnal
people
Certified
diploma
3. Marcel Grosbusch & Fils
Thank you all for your attention
4 Malta and the work it has undertaken
to assist family businesses
Dr. Nadine Lia
• José Manuel Durão Barroso, Former President of the European Commission
“Family firms are crucially important for Europe. They make a significant contribution to Europe's GNP and employment, and tend to be great innovators, with a longer-term vision. They also tend to be firmly rooted in their regional and national culture, displaying the sort of European values that we all share.”
• EC Guidebook
Creation of a transfer-friendly regulation framework: To help the transfer of businesses means having the right regulatory framework. The European Commission dealt with this area in its recommendation on the transfer of small and medium-sized enterprises. It invited the Member States to improve their legal and fiscal environment for business transfers. Some progress has already been made in implementing the recommendation, but there is still work to be done.
• Miżura 120 ta’ 2013
Se jiġi indirizzat L-Att tan-Negozju tal-Familja. Il-liġi se tagħti definizzjoni ċara ta’ x’inhu negozju tal-familja u min huma l-membri tal-familja u se tinċentiva t-trasferiment tan-negozju bejn membri tal-istess familja. Kull negozju tal-familja rreġistrat taħt dan il-Att se jkun eliġibbli sabiex japplika għal numru ta' benefiċċji.
4. Malta Family Business Act 4.1 The Journey Began…
4. Malta Family Business Act 4.2 Family Businesses in Malta
• More than any other Member State, Malta’s economy depends on its SMEs which have so far weathered the economic crisis well.
• Around 98% of all businesses are micro, small and medium sized enterprise with the vast majority of them being family run businesses.
• 95% of these SMES are classified as micro enterprises having less than 10 employees and provide about 80% of all jobs in the business economy and create 71% of the overall value added.
• For both variables, this is about 14 percentage points more than the EU average.
4. Malta Family Business Act 4.2 Family Businesses in Malta
• Last year more than 80% of family businesses in Malta reported an increased turnover over the past 12 months.
• 60% of family businesses surveyed generating an average of 24% of turnover from overseas markets, and as many as 52% of family businesses recognised the importance of establishing new entrepreneurial ventures.
• In the past 3 years Malta has doubled its economic growth, reduced unemployment to the lowest figures in history, registered the highest investment rates and lowest deficit and national debt figures.
• Pre Consultation
Direct consultation with over 40 stakeholders and public consultation with the general public
• Committee
Public and private sector stakeholders meeting weekly for a period of a year
• Further Consultations
Audit and Legal firms Firms; Review of local and international legislation; EU Commission DG Enterprise and Industry; Meetings with local and foreign family businesses; University of Malta Faculties of Law, FEMA, Sociology and foreign Universities.
• Draft Bill
White Paper – Public Consultation, Review of Bill, Attorney General, Cabinet, State Aid Monitoring Board, Parliament.
4. Malta Family Business Act 4.3 The Journey Began…
4. Malta Family Business Act 4.4 Surveys
Quantitative
• National Statistics Office commissioned to specifically to gather key data on family businesses from amongst its business register.
• 2,500 businesses in Malta were targeted. • First recorded official statistics in the EU on
family businesses. • Most family businesses employ between 2-5
family members.
• Nearly 83% would opt to transfer the business to the next generation
• The major challenges faced were: o Taxation issues; o Financial problems; o Succession challenges and risks; o Family governance arising from conflict and
retirement uncertainty.
• Ministry for Economy cooperation agreement on SMEs with the Department of Sociology at the University of Malta.
• Researcher carried out direct interviews with
micro, small, medium and large family businesses.
• The researcher provided qualitative data and served as a basis for the NSO survey which they assisted in developing.
• Research themes: o Continuity and succession planning; o Structure – general, management and
ownership; o Gender and maternity; o Difficulties accessing the field; o Episodes when the family aspect featured
strongly; o Strengths and weaknesses of being
involved in a family business.
• Malta was one of the few member states who won EU funds on the basis of the official legal definition of a family business Malta has adopted.
• This will make Malta one of the very few EU
Member States to have obtained official statistics on family businesses, and the first to have been able to carry out a survey based on legislation.
• Final report indicates that nearly a third of
respondents are already fully classified according to the legislation
EASME COSME
Statistics for Family Businesses
Qualitative
4. Malta Family Business Act 4.5 Main objectives of legislation
To encourage the regulation and governance of family businesses; To encourage the transfer of the family business from one generation to the next during their lifetime; To encourage and assist family businesses to enhance their internal organisation and structure with the aim of effectively operating the businesses towards succession.
To create a legal definition of family businesses.
4. Malta Family Business Act 4.6 Incentives
Governance Fiscal
• Loan guarantee – Enhanced capping on maximum guarantee
• Micro invest – Enhanced tax credit
• Positive consideration of lease renewal of industrial government leased premises
• Educational and Training –of family business owners and their employees
• Advisory – Funding for Legal, accountancy and notarial advice relating to business succession
• Mediation through Arbitration – for the establishment of the fair value of the family business
• Investment Aid 2014-2020 – Waivering of the condition that assets are to be bought by unrelated third parties – now applicable to family businesses allowing them greater access to investment aid
The Family Business Act
Reduced stamp duty on the value of the
immoveable property
Exemptions of stamp duty on a capped value of shares
Budget 2017
Parents transferring their family business to
their children during 2017 will benefit from a reduced stamp duty of 5% to 1.5%
4. Malta Family Business Act 4.7 Official launching
• Established in Malta whereby a business has a:
“Head office, agency, or branch or part of a business and includes any permanent presence of that business carried out in Malta”
• This allows foreign businesses to have access and applicability to the legislation and further enhances Malta’s identity as an International Finance Centre
4. Malta Family Business Act 4.8 Foreign family businesses
4. Malta Family Business Act 4.9 Why Malta?
Why Malta
?
No wealth tax
Low income
tax
6/7 tax rebate
70 + double
tax treaties
60 + bank
licenses
Cheapest & swift test
OECD
Onshore
Citizenship & visa
program
EU member
Schengen
Commission approved
Eurozone
Commonwealth
Common Law Jurisdiction
Euro Med North
African Relations
Pro business
Political Stability
Excellent climate
Multi Lingual
IFC
“You don’t own it. You’re just watching it, guarding it, nurturing it, to hand it over
to the next generation in as good a condition as possible.”
4. Malta Family Business Act Patek Phillipe
4. Malta Family Business Act
DR. NADINE lia Email: [email protected] [email protected] Tel: 00356 2220 9524 Web: www.familybusiness.org.mt
Thank you for your attention
5 Panel Debate
Edelfried Schneider (Accountancy Europe)
Jacques Hirtt (Muller & Associés)
6 Q & A
Thank you very much
For your attention
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