Ninety-year-olds go into the office every day
Withers’ Singapore partner Stacy Choong (right) and Hong Kong, counsel, Pearl Lam (left) also say that Chinese millennials, if from rich families and educated abroad want to pursue their own passions.
What do families do when the second generation doesn’t want to take over the family business?
If the second generation refuses to take over, the older generation will hold control of the business until their death: we have seen ninety-year-olds going into the office every day and the second generation sell the business. Or the older generation may sell the business to third parties or list it during their lifetime. There are more private equity funds in Asia now, so selling to private equity, other family businesses, or existing business partners are all possibilities.
Has the second generations’ unwillingness to take over to do with the nature of ‘sunset’ businesses?
The Chinese millennials, if from rich families, are likely to have been educated abroad and want to pursue their passions and interests. Unwillingness to take over the family business can be caused by many factors, and the nature of the family business is one of them, but there are also differences in personality, working alongside the older generation or personal aspirations. The advance of technology is also often a tension point. The next generation wants to modernise the business and introduce new technology, or diversify into tech-related or unrelated business areas, but the parents may think that this is a waste of money. If the older generation resists or refuses to discuss this issue, their children become disinterested and usually decide to leave to create their own business or simply remain there as dispassionate employees. The patriarchs who are interested in tech investments are often very young themselves, so may not be at a stage of wealth transition yet.
Is a change of staff inevitable in a succession transition?
Yes. The second generation usually has a completely different working style and they want to establish their authority when they take over. The long time staff who worked with the first generation usually find it very difficult to work with the second generation, and the latter want a fresh perspective and employees who are not just ‘yes men’ to the older generation. Hence it is natural to have a change of staff during the transition.
Is the succession crisis fuelling the growth of the private equity market in China?
Yes and more private equity houses means more exit opportunities. We have also seen partial exits, so that the patriarch still feels he remains somewhat invested in his legacy business.
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