The Family-Business Factor in Emerging Markets
The industrial titans of the Gilded Age were largely family businesses. But today, in most developed nations—particularly the United States, the United Kingdom, and Japan—the largest, industry-leading companies are typically held by a broad, dispersed mix of shareholders. Less than one-third of the companies in the S&P 500, for example, remain founder- and family-owned businesses, meaning that a family owns a significant share and can influence important decisions, particularly the election of the chairman and CEO.
So far, the picture is quite different in emerging economies. Approximately 60 percent of their private-sector companies with revenues of $1 billion or more were owned by founders or families in 2010. And there are good reasons to suspect that these companies will remain a more significant part of their national economies in emerging markets than their counterparts in the West did about a century ago. As brisk growth propels emerging regions and their family-owned businesses forward, our analysis suggests that an additional 4,000 of them could hit $1 billion in sales in the years from 2010 to 2025. If that’s how things shake out, such companies will represent nearly 40 percent of the world’s large enterprises in 2025, up from roughly 15 percent in 2010. Developing an understanding of them, therefore, is fast becoming a crucial long-term priority—not only for global companies active in emerging markets, but also for would-be investors that must ultimately decide whether and how to support this fast-growing segment of the economy.
Finally, people who watch emerging markets should keep a weather eye on the role of regulation, as many governments in these countries are struggling to strike a balance between denying family-owned businesses excessive privileges and opportunities to make profits, on the one hand, and fostering entrepreneurism to promote their economies, on the other. Would-be investors ignore at their peril the potential of regulatory intervention to reshape the nature of competition in these markets quickly and dramatically.
What We Do
Our teams combine a nuanced understanding of the institutional and strategic issues faced by family businesses with our industry and functional expertise. We draw on proprietary diagnostic tools and an extensive database of proven best practices, and we offer clients access to a unique network of families to share experiences. We help clients create governance systems to maintain unity and a sense of purpose, to transition between generations and to avoid conflicts over values, financial issues, and personal relationships.
We optimize shareholding structures to create the desired blend of influence, voting power, and liquidity. We also help evaluate the attractiveness of accessing capital markets. We help design board structures and align owners, board relationships, and company management to protect and grow the business. We structure business and financial portfolios to achieve the aspirations of the controlling shareholders, that is, to grow and protect wealth over the long term.
We help families manage net wealth outside their company’s core businesses to ensure asset preservation, risk diversification, and the fulfillment of liquidity needs. We work with clients to allocate resources into philanthropy, ensuring that their efforts are aligned with the family’s mission and assets are employed according to global best practices.
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The ability to capture, organize, and extract insights from data has become requisite in every industry and function. To help our clients move quickly from data to actionable insights, we embed our proprietary knowledge in a growing collection of digital tools, analytics, and services, which allows managers at all levels to independently exploit data to make better decisions on a daily basis.