Succession: Will the Third Generation Sustain Asia's Family-Run Businesses?

The TV series "Succession" brought plenty of drama into our living rooms as fictional characters fought for control of a family media empire. Similarly, in boardrooms across Asia, a comparable power struggle is unfolding as the reigns of family businesses are passed down to the next generation.

The process of succession has proved challenging for certain families in Asia. In Hong Kong, the public is captivated by court battles between siblings vying for control of their respective family businesses. Additionally, there is heightened anticipation surrounding announcements regarding which family member is likely to assume leadership of the next generation. While this provides gripping content for drama, it is important to note that a significant number of businesses in Asia are essentially family-run enterprises. As a result, both investors and stakeholders have a vested interest in the future direction of these businesses.

Undoubtedly, technology is actively shaping the future of business. To ensure their survival, businesses must adapt and evolve in response to the constantly changing environment. Additionally, geopolitical shifts and regulatory policies exert significant influence on decision-making processes in specific key markets. The need for leadership change is already underway, and the individual assuming the role will undoubtedly be someone willing to confront these challenges directly.

It is not only crucial to strategise for succession planning to prepare for the next leader, but it has now become essential for the future family leader to embrace the evolving dynamics of the market while upholding the family's core values.

Founders who wish to maintain harmony amongst the heirs and preserve the value of the business should engage professional help in order to collectively engage the next generation in the succession planning process. Professional advisors do not bring the emotional element to the table and can advise family members on their various options.

There are many factors that can make or break a succession plan:

• Focusing on communications: When the business is undergoing a transitional period, it is important that the right message is conveyed to employees and customers/suppliers to ensure that everyone is kept up-to-date on key information and important changes.
• Establishing goals and governance: It is vital going forward that rules are documented and agreed on. Communicating these updates to family members is crucial to prevent the chance of disputes.
• Being prepared: Discuss the transition and succession plan in detail so that the role of each family member is outlined and timelines are shared with the relevant parties. Establishing all available options for the business is also critical as running on an ‘as is’ basis may not be the best choice when compared to a sale and purchase agreement, buyout or the engagement of outside professional managers.

The prosperity of Asian markets may hinge on how Asian family businesses execute their succession plans in the coming years. Professional advisors can play a vital role for family businesses, providing owners with an objective view and applying their tools of trade to ensure a smooth and successful transition.

The views expressed herein are those of the author(s) and not necessarily the views of FTI Consulting, Inc., its management, its subsidiaries, its affiliates, or its other professionals.

FTI Consulting, Inc., including its subsidiaries and affiliates, is a consulting firm and is not a certified public accounting firm or a law firm.