Locking in the Legacy: Long-Term Succession Issues in Single and Multi-Family Offices -...

LOCKING IN THE LEGACY:

LONG-TERM SUCCESSION ISSUES

IN SINGLE AND MULTI FAMILY OFFICESIN SINGLE AND MULTI FAMILY OFFICES

Presented by Håkan Hillerström

Elite Summit, Montreux – 31/5 2012

General Succession IssuesFamily Businesses and Single Family Offices

� Older generation staying in leading management roles too long

� Older generation hanging on to the ownership power too long

Solutions for generations to come

� Education, training, mentoring and integration of the next generation

� Marriages, divorces (and prenuptial agreements)

� Family conflicts

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General Succession IssuesFamily Businesses and Single Family Offices

� Communication

� No decision

Solutions for generations to come

� Fairness (equality is not the same as equal)

� Active and passive family members

� Lack of rules

� Too many family members

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General Succession IssuesFamily Businesses and Single Family Offices

� Will access to money/the business lessen my children’s motivation and desire to work (hard)?

� Will my children consume the wealth in wasteful ways?

Solutions for generations to come

� Will my children consume the wealth in wasteful ways?

� Entitlement versus merit

� Rights versus obligations

� Investment versus spending

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Succession Issues in Large Corporations

� Also difficult issue

� Recent cases

o Hewlett Packard

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o Hewlett Packard

o Berkshire Hathaway – Warren Buffett

o News Corporation – Rupert Murdoch

o Apple – Steve Jobs → Tim Cook

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No Planning

� When it comes to SFO’s and MFO’s in general, they seem to start with no or little

Solutions for generations to come

general, they seem to start with no or little regard as to how the succession will be handled.

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Succession in Single Family Offices (SFO’s)

� How many SFO’s do you know that have successfully moved from one generation to the next?

� How many SFO’s do you know that have a good succession plan

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� How many SFO’s do you know that have a good succession plan in place both with regard to ownership and management?

� Should we set a time limit on the SFO’s existence – a self destruction button after say 25 years?

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Succession – Don’t wait until it’s too late!

B) Stanley Ho interviewed by his lawyerA) Stanley Ho – The fight for his fortune

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Another case : Liliane Bettencourt, L’Oréal

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SFO’s – Final Thought

� Empower the next generation

Message to the older generation:

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� Message to the older generation:

“You cannot rule from the grave”

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Succession in Multi Family Offices (MFO’s)

� Enthusiastic start

� But very few have any succession plans in place

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� But very few have any succession plans in place

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Different Succession Models for MFO’s

A) Naked in naked out (like the big audit firms)

B) Part-ownership with internal market but difficult when growing fast –

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B) Part-ownership with internal market but difficult when growing fast –

becomes too expensive

C) Stable, large owner in background (eg. Bessemer, Quilvest, Sand

Aire)

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Different Succession Models for MFO’s

D) Sell to larger organisation (defeating the purpose)

E) Outside corporate shareholder (eg. Flemings, Standard Chartered)

Solutions for generations to come

E) Outside corporate shareholder (eg. Flemings, Standard Chartered)

F) Old Swiss private banks model – personal and entire liability

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MFO’s – Final Thought

� Must discuss internally, make decision which model works best, openly communicate to clients

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Conclusion

� Plan the succession right from the start

� Take time – succession plans are not done overnight

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� Any succession plan must be thoughtful and well communicated

� Create an Emergency Plan

� Ensure successors are properly trained and prepared

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Conclusion

� Get the next generation involved – commitment follows

� Empower the next generation

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� Don’t sit on idle money make sure future generations get the chance and are encouraged to continue to invest

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Conclusion

“Succession is like a relay race…..

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Whoever succeeds must be up to speed with the business and able to propel this still

further. At the same time, the predecessor must be comfortable that he can pass on

the baton and that it will be in safe hands”.

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Your contact

Håkan Hillerström

Tel: +41-22-827 85 00

Mobile : +41-79-200 41 30

Solutions for generations to come

Mobile : +41-79-200 41 30

hakan@hillerstrom.ch

www.hillerstrom.com

100, route de Frontenex

CH-1208 Geneva

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