European Family Business Barometer: A more confident outlook (3rd edition)

Third edition

European Family

Business

Barometer

A more confident outlook

December 2014

www.kpmg.com/familybusiness

1 © 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to

obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

Contents

Selected findings from the survey Page

■ Confidence: How do you feel about the economic situation of your family businesses for the next six months? 2

■ Confidence: In the previous six months you company has… 3

■ Challenges and concerns: What are the major issues facing your family business right now? 4

■ Investment strategy: Does your strategic plan include any investments or divestments? 5

■ Investment strategy: Are you thinking about investment opportunities? And if so where? 6

■ Internationalization: Why doesn’t your family business sell to foreign markets? 7

■ Access to finance: In the last six months, has your family business experienced difficulties in accessing finance? 8

■ Financing: Which of the following options do you consider the most attractive in the next six months? 9

■ Regulatory environment: What changes/improvements would you welcome most? 10

■ The future for family business: What would you consider to be the top five key strengths of your business? 11

■ The future for family business: Importance of family issues for the business 12

■ Family business strategy: Are you considering any options for your family business over the next 12 months? 13



Confidence

Family businesses are consistently confident about the future

70% indicate a positive outlook for the next six months

(up from 54% in December 2013)

25% are neutral about their economic prospects (4% increase since June 2014)

Only 5% are negative (a drop from 12% one year ago)

As a result – family businesses are increasingly ready to make new investments.

How do you feel about the economic situation of your family

business for the next six months?



In the previous six months your company has:

Confidence

54% have increased turnover (up from 44% in June 2014)

48% have increased staff numbers (up from 40% in June 2014)

72% of respondents are engaged in activities abroad

Businesses are more cautious about international expansion and

focus on maintaining operations on foreign markets

(a rise from 32% to 44% in six months)



Challenges and Concerns

What are the major issues facing your family business right now?

Decline in profitability - 47% of respondents; cited as major

concern twice in a row (+ 9% over a year)

War for talent - 42%, rising up to the second most important

challenge (up from 23% in a year)

Cost of labor has risen from 15% one year ago to 29% now

Though there is a drop in political uncertainties (from 33% to

27%) and regulatory changes (from 36% to 26%) in the last

six months, businesses still want to operate in a stable and

predictable regulatory environment



Investment Strategy

Does your strategic plan include any investments or

divestments?

86% of respondents are planning new investments as part of

their strategic plan (75% in June 2014, 79% in December 2013)

Core business is a top investment priority (54%)

Investments in internationalization slightly but steadily decline

(a drop to 25% from 27% six months ago, and 29% a year ago)

Decrease of investments in internationalization may alter the

balance between domestic markets versus foreign markets in the

future.



Are you thinking about investment opportunities?

Investment Strategy

86% of respondents are considering future investments

47% of respondents prioritize investment in their own country

20% plan to focus on European markets

Neighbouring markets mseem less risky due to their proximity and familiarity

Only one third associate their success with other overseas markets



Internationalization

Why doesn’t your family business sell to foreign markets?

Respondents have slightly increased activities abroad (from 60% to 63% in six month)

Still 37% do not sell abroad

34% among them explain: their products/services cannot be sold externally

24% among them consider domestic business to be sufficient

The question is: Are the given reasons for not exporting valid or are companies not willing

to make the effort to expand in new markets?



Access to Finance

Access to finance can be a key issue and growth inhibitor

Positive outlook: 80% have had no difficulties with funding in the last

six months – significant improvement from one year ago (49%)

Only 20% (compared to 51% in December 2013) still experience difficulties

Of those struggling to access finance, 35% note that underfunding can

make it difficult to commit to new investments in the future

In the last six months, has your family business experienced difficulties in accessing finance?



Financing

Which of the following options do you consider the

most attractive in the next six months?

75% of respondents use traditional sources of finance, like …

Bank financing (47%)

Own equity (28%)

Family Business try to balance financing needs with the reluctance to

relinquish control and desire for privacy, so…

Possible solution: to shift attention to other less traditional not less

attractive sources of external financing*

*Topic is developed further in KPMG Global Family Business Survey ‘Family matters:

Financing Family Business growth through individual investors’, September 2014



Regulatory Environment

What changes/improvements would you welcome most?

Future success of Family Businesses is

directly linked to human capital

Mostly welcomed are regulatory reforms to

support the recruitment of the skilled staff

(from 39% to 50% in six months)

49% wait for the reduction of administrative

burden

Demands for simpler tax rules and for benign

tax and administrative arrangements of inter-

generational family business transfers have

decreased (from 52% to 42%, and 45% to

37% respectively over six months)



The Future for Family Business

What would you consider to be the top 5 key strengths of your

business?

Respondents attribute much of success of their companies to

their unique characteristics:

Ability to take quick decisions – up from 34% to 46% in a year

Private ownership – up from 10% to 41% in a year

Long-term perspective – up from 32% to 38% in a year

A customer stays in focus for family businesses:

48% indicate ability to win business or customer loyalty

45% focus on customer service



Importance of family issues for the business

Family businesses are driven by a series of critical

success factors; among the most important:

Good governance structure and processes in place

(87%)

Ability of family business leaders to prepare and

train their successor (82%)

Maintaining family control over business (81%)

Other growing trends: financial literacy amongst family

members and philanthropic activities

The Future for Family Business



Family Business Strategy

Are you considering any options for your family

business over the next 12 months?

Family Businesses develop their business plans for the

coming year – 50% will undertake strategic changes

The major steps are:

Passing the management to the next generation

(24%)

Appointment of a non-family CEO but retaining

family ownership/control (23%) -– an alternative

route that many companies consider in relation to

succession

Passing the ownership of the business to the next

generation (22%)



Methodology

The European Family Business Barometer is based on the results of an online survey. In total 878 completed questionnaires were

received during the period 15 September to 20 October 2014.

This is the third survey of its kind to be conducted measuring trends among family businesses.

The responses from the following countries have been analysed:

Austria

Belgium

Bulgaria

Cyprus

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Malta

Poland

Portugal

Romania

Spain

The Netherlands

UK



Country contacts

EUROPE

Christophe Bernard

Partner, Global Head of

Family Business

T: +33 (0) 1 5568 9020

E: [email protected]

AUSTRIA

Yann-Georg Hansa

Partner, KPMG

T: +43 (0) 1 3133 2446


Peter Humer

Partner, KPMG

T: + 43 (0) 732 6938 2212


BELGIUM

Thomas Zwaenepoel

Partner, KPMG

T: +32 2 708 38 61


BULGARIA

Kalin Hadjidimov

Partner, KPMG

T: +359 (0)2 969 7700


CYPRUS

Demetris Vakis

Partner, KPMG

T: +357 22 209 000


FINLAND

Ari Engblom

Partner, KPMG

T: +358 (0) 20 760 3614


FRANCE

Jacky Lintignat

Partner, KPMG

T: +33 (0) 1 5568 9036


GERMANY

Dr. Christoph Kneip

Partner, KPMG

T: +49 (0) 211 475 7345


GREECE

Christian Thomas

Partner, KPMG

T: +30 21 11 815 815


HUNGARY

Zoltán Mádi-Szabó

Senior Manager, KPMG

T: +36 1 88 77 331


IRELAND

Colin O’Brien

Partner, KPMG

T: +353 (0) 1 410 1679


Olivia Lynch

Partner, KPMG

T: +353 (0) 1 410 1735


ITALY

Gianluca Geminiani

Partner, KPMG

T: +39 071 290 1140


MALTA

Anthony Pace

Partner, KPMG

T: +35 6 2563 1137


THE NETHERLANDS

Olaf Leurs

Partner, KPMG Meijburg & Co

T: +31 (0) 76 523 7514


Ernst Groenteman

Partner, KPMG

T: +31 (0) 20 656 7482


POLAND

Miroslaw Grabarek

Partner, KPMG

T: +48 22 528 1091


PORTUGAL

Vitor Ribeirinho

Partner, KPMG

T: +351 21 011 0161


ROMANIA

Richard Perrin

Partner, KPMG

T: +40 37 237 7792

E : [email protected]

SPAIN

Juan Jose Cano Ferrer

Partner, KPMG

T: +34 914 563 818


UK

Gary Deans

Partner, KPMG

T: +44 (0) 141 300 5811


Thank you

To download the third EFB-KPMG European

Family Business Barometer – A more

confident outlook, please click here.

http://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/family-business/Pages/family-business-barometer-a-more-confident-outlook.aspx

© 2014 KPMG International Cooperative (“KPMG International”), a Swiss

entity. Member firms of the KPMG network of independent firms are

affiliated with KPMG International. KPMG International provides no client

services. No member firm has any authority to obligate or bind KPMG

International or any other member firm vis-à-vis third parties, nor does

KPMG International have any such authority to obligate or bind any

member firm. All rights reserved.

The KPMG name, logo and “cutting through complexity” are registered

trademarks or trademarks of KPMG International Cooperative (KPMG

International).

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The information contained herein is of a general nature and is not intended

to address the circumstances of any particular individual or entity. Although

we endeavour to provide accurate and timely information, there can be no

guarantee that such information is accurate as of the date it is received or

that it will continue to be accurate in the future. No one should act on such

information without appropriate professional advice after a thorough

examination of the particular situation.

Education

European Family Business Barometer: A more confident outlook (3rd edition)