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Beat Keiser Head of Swiss Equities
1. Family businesses – an overview
In most successful family businesses, the importance of taking a long-term perspective is passed on from generation to generation - they tend to think in terms of quarter centuries, not next quarter’s financial results. It has also proven to be a source of their endurance which was confirmed by the 2023 EY and University of St. Gallen Family Business Index (Chart 1).
Chart 1 - The largest* 500 family businesses…
According to the International Monetary Fund[1], the global economy grew by 6% in 2021, and is forecast to grow by 2.7% in 2023. At the same time, family enterprises have been growing at nearly 2 times the rate of advanced economies and around 1.5 times the rate of emerging market and developing economies.
In 2022, family businesses collectively generated USD 8.02 trillion in revenue-up 10% from 2021.
Family businesses employ 24.5 million people worldwide.
If Family businesses were a national economy, they would be the third largest among the club of 19 “trillion-dollar economies[2]” that exist in the world, after the US and China.
*on the index
Source: 2023 EY and University of St.Gallen Family Business Index.
2. Are family businesses more resilient?
Like listed companies, family businesses have faced a more challenging environment in recent years. However, research suggests that many companies will do well due to their resilience, their emphasis on taking a long-term view and their ability to react quickly in crisis.
A KPMG study, based on 3,000 companies in 2021, found that family businesses laid off fewer people globally during the pandemic (8.6%) than other companies (10.2%). As for the long term, a study in the Harvard Business Review found that family businesses dominate most lists of the longest-lasting companies in the world, and they’re well-positioned to remain competitive in the 21st century economy.
3. What sets family businesses apart?
The below chart shows the six attributes displayed by successful multi- generational family owned companies.
Chart 2
Long- term thinking
Financial prudence
Value and loyalty to employees
Entrepreneurial renewal
Deep emotional connection to the business
Philanthropy and CSR
4. Family businesses from an investor perspective
The longevity of family businesses is important not just to their owners but also to the economy. According to the U.S. Census Bureau, family businesses — companies in which two or more family members exercise control, concurrently or sequentially —represent about 90% of American businesses. These companies, ranging in size from two-person partnerships to Fortune 500 firms, account for half of the nation’s employment and half of the U.S. gross national product. Family businesses are the backbone of the global economy. And contrary to popular belief, companies with founding families as shareholders are not exclusively small, local businesses that are difficult for investors to access. In reality, there are numerous publicly traded companies in various industries and sectors around the world that fall into this category.
Examples of such companies include
Many of these companies have also sought outside funding to expand, pay inheritance taxes, or allow family members to liquidate their shares. A study by PwC in 2018 found that family-controlled businesses outperformed the broader market indices in terms of revenue, growth and job creation, over the last five decades.
[1] “Countering the cost-of-living crisis”, World Economic Outlook report, October 2022, accessed via imf.org.
[2] Bajpai, Prableen, "An Overview of the Trillion-Dollar Economies in the World", via nasdaq.com, 29 April 2022.
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