Few Middle East family businesses plan to go public

June 17th, 2008 - 8:51 pm ICT by IANS  

Dubai, June 17 (IANS) Only 20 percent of the family businesses in the Middle East are planning to go public, according to a new survey. Though half the businesses agreed that going public was important for their survival, 20 percent opposed the idea while 60 percent remained not committed to the option, according to the survey conducted by consultancy firm Ernst & Young.

Called the ‘1st Ernst & Young Family Business Survey’, it covered a range of family business characteristics including strategic planning, organization structure, governance, human resource alignment, operational excellence, management and ownership transition, succession planning and communications, according to an Ernst & Young statement.

“The 1st Ernst & Young Family Business Survey examines their current state and gives the participants a chance to reflect on their own strength and weaknesses in light of key challenges common to them,” Rami Nazer, partner and head of Ernst & Young’s Middle East Family Business Centre of Excellence, said.

The survey covered businesses in Saudi Arabia, Kuwait, Qatar, Oman, Lebanon and Jordan.

Of the businesses surveyed, 50 percent had annual revenues above $100 million, 17 percent had annual revenues of over $500 million while only eight percent were publicly traded.

Only 16 percent of the businesses surveyed felt that there is a well-defined succession, management and ownership transition plan, according to the statement.

“When we see 68 percent of the respondents declaring that their management team is selected purely on the basis of competence and not on relationship, we can conclude that the majority of regional family businesses are mature and practical in terms of appointing management,” said Omar Bitar, managing partner for advisory services at Ernst & Young Middle East.

“They realize that professionalization of management structures and adoption of global business processes bring long term value to the business. The fact that 40 percent of family businesses have non-family members on their board of directors suggests that they are opening up to new ideas and are willing to accommodate differing perspectives,” he added.

Of the businesses surveyed, 46 percent were established in the 1960s or before while all of those companies employing 5,000 people or more were founded in the 1960s or before.

A total of 72 percent of the respondents operated in retail and consumer sectors followed by 48 percent in real estate, hospitality and construction and 32 percent in industrial products. Only 12 percent were in energy, chemicals and utilities.

However, 60 percent were planning to diversify into new sectors, the survey found.

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