What are the Reasons for Family Businesses not being Transitioned?
Many Middle Eastern businesses are still in the first generation so there is a lack of a track-record of best practice succession planning. This lack of track-record is not helped by some family feuds, over billions of dollars, being played out in the regional courts. Consequently, other families witnessing such feuds become sensitive about avoiding their own family hostilities and delay succession planning.
Furthermore, we cannot overlook the obvious; that many families are traditional and either will seek to pass the family business to the eldest son or permit Sharia law principles to take effect. However, these obvious approaches are not always successful for the business which can result in its ultimate failure by the next generation: the eldest son might not be well suited to the business or the ownership structure, divided in accordance with Sharia principals, causes disarray to the business.
As Western advisers, we should be acutely aware that few Middle Eastern families will bring in competent outsiders to lead or manage a family business or indeed resolve issues around succession. We need to appreciate, understand and respect the regional culture, in particular that the family bloodline is of primary importance, and take the time to truly understand the family’s objectives.
