Succession crisis in Japan expected to lead to buy-out bonanza
Private equity groups are gearing up for a boom in buy-outs of Japanese family businesses, as many of them opt to sell in the face of challenges linked to succession. A report in the Financial Times said the Japanese government is poised to conduct a survey of 2,500 listed companies to determine the state of their succession planning. This, said the report, will unintentionally enable private equity groups to better identify buy-out targets.
The FT article quoted Megumi Kiyozuka, managing director of the private equity group CLSA Capital Partners in Japan, who said there were many listed companies in Japan where 20-50% of the shares are still owned by the original founding family and are run by the family members. “Those listed companies are technically held by public shareholders but effectively family-owned. That is where the succession issues are most noticeable.” He added that greater levels of data would focus potential buyers. The FT article also quoted another analyst who said Japanese family businesses where succession was a problem would consider a foreign buyer.
Family office and business surveys
Business surveys have a habit of coming out in early September to take advantage of the beginning of one of the busiest times in the working calendar. So, it was little surprise that the world of family capital was well represented in the hot survey month of September - with two on family offices and one on family businesses. The family office studies - one from the Association of French Family Offices (AFFO) and the other from the London research group Campden Wealth - concentrated mostly on asset allocation.
The Campden report said family offices are cutting back on hedge fund allocation and also prefer private equity funds, rather than direct investments in companies - which goes against Family Capital’s own observations that have found direct deals are increasing at the expense of PE funds. The AFFO report, which was conducted by the polling organisation OpinionWay, found that French family offices were partial to real estate investments - which typically comprise 30% of portfolios, followed by listed equity 23%, and private equity 17%. The report said family offices are likely to increase further their allocation to property and unlisted businesses in the years ahead. Both reports highlighted the rising issue of cyber-security for family offices.
On the family business front, KPMG together with the Brussels-based lobby group European Family Businesses launched their 5th European Family Business Barometer. The survey showed a relatively sanguine outlook for Europe’s all-important family business sector, with 83% of respondents expecting growth in the year ahead. Nevertheless, family businesses were concerned about attracting talent and political uncertainties. Here’s the press release for those interested in more detail.
Exor and the Dutch connection
Exor, the holding company controlled by Italy’s famed Agnelli family, has announced the move of its headquarters to the Netherlands from Turin in Italy. But does the shift undermine the group’s relationship with its traditional stakeholders in Italy? John Elkann, the chairman and chief executive of the group, which has holdings in Fiat Chrysler, Ferrari, The Economist and Partner Re, doesn’t think so. He told reporters last weekend not to see the move as “symbolic”, nor as a “fiscal ploy”, according to theFinancial Times. After all, Exor will continue to be listed on the Milan stock exchange and is only moving its fiscal and legal headquarters to the Netherlands.
Elkann has always been a big advocate of the family business model - and has spoken to the media and conferences about his and his firm’s dedication to the concept. But some might see the current move as an example of Exor becoming more concerned about short-term business priorities, rather than adhering to its tradition of protecting the long-term interests of its stakeholders. Still, whatever way the move is interpreted, one thing isn’t in doubt and that’s how Elkann has changed the fortunes of the group since 2004 when it faced bankruptcy on the back of severe problems at Fiat in the early 2000s. The latest results for Exor show net profits nearly doubling year on year to €430 million in the first six months of 2016. That will certainly keep one group of stakeholders happy - the shareholders.