Asian Family Businesses

Family BusinessSuccessionSustainabilityPrivate CapitalC-Suite Succession
min Article
September 30, 2021
8 min
Family BusinessSuccessionSustainabilityPrivate CapitalC-Suite Succession
Executive Summary
Asian family businesses are undergoing a pivotal shift in which it is anticipated that over 30% will go through a generational change in the coming five years.

Family businesses form the backbone of the Asian economy, with 85% of the companies in the Asia Pacific region owned by a family group.1 Of the top 750 global family businesses ranked by revenue, over 20% are Asia-based, with combined revenue of almost $2 trillion.2

Currently, Asian family businesses are undergoing a pivotal shift in which it is anticipated that over 30% will go through a generational change in the coming five years.In speaking with our clients, we see evidence that many are already in the midst of such a generational change. To better understand the trends impacting family leadership in Asia, we analyzed over 30 family-owned businesses in India, Hong Kong, and Singapore, and interviewed our family business advisors to enhance our research. Through these conversations and research, we identified four trends that are impacting family businesses in Asia:

01. Need for formal leadership succession plans: An increasing number of family businesses are paying attention to leadership succession, not just wealth succession

02. Development of the next generation: With the disruption to businesses and the emergence of digital business models, formal development plans for next-generation family leaders are crucial to success

03. Increased activity with private equity: Family businesses are increasingly comfortable with private equity investment

04. Leading the way in sustainability: Asia’s family businesses are well-positioned to take the lead on ESG and sustainability themes

The presence of family dynamics, history, culture, and expectations provides an additional layer of complexity to leadership in any family business. However, these factors may also give rise to distinctive values, assets, and capabilities such as quick decision-making that gives a family business a competitive advantage in facing future challenges.

As the second and third generations of successful family business leaders look to build their careers, our research and discussions with advisors indicate that there are several trends that will impact how this generational transition plays out:

An increasing number of family businesses are paying attention to leadership succession, not just wealth succession

According to a study by the Family Business Institute, only 30% of family businesses can be passed down to the second generation; 12% can continue to the third generation; and only 3% develop to the fourth generation or more.4 In the Asia Pacific region, reflecting the economic and societal histories of each country, family businesses are generally much younger than their European counterparts and many family firms are in their second or third generation of family leadership. Each generation has slightly different challenges to deal with: 

  • Among the second generation, which largely involves siblings, conflicts tend to arise when the founder of the business has not established a clear succession plan or family charter. Often, the founder retains sole authority throughout their tenure and is relied on to resolve conflict, triggering a crisis or family feud when the founder passes away or is no longer involved in the business.
  • Among the third generation, the potential conflict intensifies as the family business now involves a bigger group that includes cousins. Some of them may be more detached from the vision or understanding of the family business than the second generation. There could be added complexity as different cousins may or may not be employed in the business.

With many Asian family businesses at the cusp of generational transitions, clarity around leadership succession is an emotionally difficult topic — but a necessary one to tackle for the business to thrive. Families who have mastered leadership succession either create formal succession and governance codes or charters for family members or start the process of professionalizing the businesses by embedding formal governance structures, potentially involving leaders from outside the family. Two Indian family businesses that have a long history and are ahead of the curve in this respect are the Rao family of GMR Group and Reddy family of Apollo Hospitals. These families set up strong family succession and governance structures. Other families, including Vedanta and Dabur, prefer to have their businesses run by professionals and involve very few family members in them.

In practice

“We want to build an entrepreneurial organization that creates value for society. This vision is very difficult to achieve, especially at this juncture when there is a lot of disruption. We have also realized that unless we have a family governance model, corporate governance won’t happen, and unless corporate governance is in place, we cannot create an institution in perpetuity. Family governance is a prerequisite for all family businesses. I believe that with good family governance, one can create any type of business.”5

- GM Rao, GMR Group

In 2007, Grandhi Mallikarjuna Rao, the chairman of infrastructure developer GMR Group, adopted a comprehensive family constitution that was years in the making. The constitution defined how his successor would be selected, the minimum qualifications family members must have to enter the business, and their remuneration and perks. It also provides for a family member wanting to branch out and explore opportunities outside of the family business. GMR’s vision is to create what Rao calls an “institution in perpetuity.”

With disruption the businesses and the emergence of digital business models, formal development plans for next-generation family leaders are crucial to success.

Many families develop the next generation by letting them take the lead in setting up new business units, developing new product or service innovations, driving digitalization initiatives, or expanding the business into new regions. White space opportunities, whether in innovative areas or geographic expansions, allow the next generation room to maneuver and autonomy to shape strategy or come up with new ideas without excessive risk-taking, oversight, and intervention. By allowing them full ownership of these areas, current leaders give the next generation an opportunity to prove their worth and gain respect from family and non-family member colleagues.

Another trend that we are seeing among some progressive families is giving the next generation of leaders the opportunity to gain global experience in relevant ecosystems, usually in the early years of their career, before joining the family business. These experiences can be assignments in banking, private equity, accounting, management consulting, other family businesses or even entrepreneurship. This gives them first-hand experience in different functional areas and industries. In addition, it allows opportunities to bring back personal discoveries and explorations, which can be infused to rejuvenate or modernize the business.

While the above initiatives work, there is a real need to develop a broader understanding of the business and societal ecosystem. Thus, more progressive families are looking for a structured development and coaching program to allow the incoming family members to be “fit for purpose” and “future-proofed,” helping them rapidly develop their confidence and gain the respect of senior professionals in the business.

In practice 

Ho Ren Yung, daughter of Ho Kwon Ping and Claire Chiang of Banyan Tree, is a graduate of the London School of Economics (LSE), where she wrote her thesis on social entrepreneurship. Ren Yung has co-founded a number of businesses, most notably clothing label Matter, which focuses on collaboration with artisans and sustainable practices.6 When she re-joined the family business, she helped build the sustainability agenda of the business and was involved in initiatives such as relaunching the brand’s body and aromatherapy products with sustainably sourced packaging and natural ingredients.

 “The family business is like an extended family, so I feel like I never left it. But I left because I needed to go out to learn on my own what it means to start my own business. I met a lot of people who shaped me into who I am today. Leaving the company made me realize where I could contribute to Banyan Tree. My parents always encouraged my brothers and me to see it not as an obligation to be part of Banyan Tree but as an opportunity. They gave us time to come to the decision ourselves. I returned to Banyan Tree because I want my work to have as much impact as possible. I could have achieved that same impact outside, but it would have taken a much longer time.”7

Ho Ren Yung, Banyan Tree

Family businesses are increasingly comfortable with private equity

Historically, many family-owned businesses have not been inclined to accept funding from private equity investors, as they typically view such investors as being more interested in making a quick profit than improving the company’s long-term performance.8 More recently, however, both push and pull factors have nudged family businesses to explore funding through the sale of a minority or even majority stakes. This trend has been triggered by:

  • Lack of successors: The next generation is not always able or willing to step into the shoes of their elders. Bringing in the right private equity partner allows family firms to ensure business continuity and institutionalization to facilitate sustained growth.3
  • Growth and expansion: After riding the region’s rise over the past decades, family firms that dominate the economic landscape are now looking for financial partners to invest in new asset classes or new economy businesses that are complementary or additive to their existing operations. Private equity involvement is an especially attractive option for growth if family businesses want to avoid the complexities of going public, which include managing more stakeholders and reduced flexibility to be agile in the business environment.
  • Effect of COVID-19 and market trends: The pandemic has upended how global business is done. Like other corporate executives, family-owned business leaders are feeling the stress from COVID-19, but the effect for them is magnified as their personal wealth and income are deeply tied to their businesses. Such business owners may be more open to private capital than ever before, as they look to shore up their liquidity to weather the pandemic and sustain their business. This will give investors many more opportunities than in the past to take minority stakes in such businesses.8
  • Increased private equity focus on Asia: Private equity’s focus on Asia has grown by leaps and bounds in the last few years. APAC-focused funds raised close to $800 billion between 2015 and 2019, and around 28% of all private equity assets under management are now focused on APAC.8 There is an abundance of both growth capital and buyout funds should families wish to exit the business.

 In practice

Hong Kong-based Li & Fung, a family business currently in its fourth generation, designs, sources and transports products from Asia to retailers such as Walmart and Nike. Its business model was upended by the rise of e-commerce and the direct-to-consumer trend. Despite efforts to restructure, digitize its operations and diversify sourcing away from China, its impact was limited, and COVID-19 further exacerbated it.10 In 2020, Li & Fung was privatized by management and a Singaporean private equity company GLP Group.11

In June 2020, the Piramal family of conglomerate Piramal Enterprises sold a 20% stake in the company’s pharma subsidiary to private equity firm The Carlyle Group and its glass unit, Piramal Glass, to Blackstone in November that same year.12 According to news reports, the proceeds of the deals went towards boosting capital, funding growth, and reducing debt.13

“We’ve seen founders, particularly the older entrepreneurs, saying there are more challenges in the world now and that they’re thinking about succession issues and management issues. Private equity is better understood now as either a potential strategic partner or as an exit path.”9

Ed Huang, Co-Head of Asia Acquisitions in Private Equity at Blackstone Group Inc.

Asia’s family businesses are well-positioned to take the lead on ESG and sustainability themes

Family businesses tend to have better ESG scores than non-family-owned peers, according to a global study initiated by Credit Suisse.14 This is largely true in Asia as well, based on our experience, with family-owned businesses having a greater emphasis on sustainability and stewardship than non-owner-driven corporations. This may in part be because the longer-term horizons and objectives of family businesses are largely aligned with those of environmental and social goals. However, we see that in some areas of governance, family businesses may not be well-suited to drive the development of new standards. For example, as many family businesses do not have significant outside shareholders, they may not put as much emphasis on the value of a formal board composed of truly independent non-executive directors.

In many ways, ESG is a natural extension of the family business DNA, which has historically been rooted in corporate social responsibility (CSR) activities such as donating time or money to charitable causes in the local community. The next generation of family leaders increasingly appreciate the concepts and benefits of good corporate stewardship and take sustainability, in particular, more seriously as a way of publicly stating their intention to do good business well.

At a local level, there are plentiful examples where founders have shown pride in delivering their societal obligations through taking care of employees and improving the local community. Tata Steel developed the town of Jamshedpur around its manufacturing facilities, and the Godrej Group decided to protect mangroves on the land it owns in Mumbai, despite the incredible demand for housing development.

Companies are also pursuing improvements at a thematic level. For example, Jardine Matheson has not only publicly pledged its commitment to biodiversity and begun to execute sustainability strategies in its operating companies but has also taken a proactive approach to engaging with public stakeholders on matters such as protecting forests.

Family businesses are not usually subject to the same external stakeholder pressures as listed companies but in the case of ESG, every type of company is subject to scrutiny. We are seeing family businesses forge ahead with implementing ESG measures. There are significant benefits in getting it right such as enhancing corporate reputation, defining longer-term purpose and relevance, and providing a North Star that unites family, employees and broader stakeholders.

As with all companies, family businesses have to avoid ‘green washing’ and must measure ESG progress in real terms against meaningful KPIs that protect our planet, enhance people’s lives and raise standards in all walks of corporate life. In possession of significant influence at a local and global level, and through managing diverse businesses of scale, family businesses can truly lead the charge on ESG.

In practice 

Thai Beverage, a Thai family business listed on the Singapore Stock Exchange, is one of Southeast Asia’s largest beverage companies. Although it did not face any outside pressure to push for sustainability, it recognized its importance and has implemented a sustainability framework since the early 2010s.  Its sustainability efforts look at aspects such as operational efficiency, usage of renewable energy, and packaging.16 As a result, Thai Beverage has been recognised as a global beverage industry leader on the Dow Jones Sustainability Index and also ranks in the top category in S&P Global’s Sustainability Yearbook.17

 “When I was younger, I didn’t see bushfires like what’s happening in Australia. I didn’t see temperatures so hot in Hong Kong that they set a record high this winter. It’s just so strange to see this disparity. But [next generation leaders are] seeing all this when they are young, so they feel more urgency to discover why this is happening and they’re hoping to provide a solution. But there’s still some gap of understanding between generations, so first we need to create a bridge between them.

People used to talk about social responsibility as a separate thing from what was happening in the rest of a company—being responsible by giving some profits to charity—but today you need to figure out a 360-degree approach that considers how the needs of your own little ecosystems converge with the broader ones of society as a whole. You need to build businesses that are not just about innovation, but that are socially innovative, and to think about sustainability not as a PR thing, but as serving humanity for the next many, many decades.”15

Adrian Cheng, New World Development

Looking ahead

In this study, we looked at family businesses operating in the unique dynamics of the Asian landscape – a melting pot of diverse cultures and business environments. Compared to their Western counterparts, most family businesses in Asia are relatively young. Many are in their second or third generation of leadership, and many are experiencing or preparing for leadership transitions. In dealing with more intimate issues like family succession, this intergenerational shift needs to be carefully planned to ensure that both the business and family bonds thrive.

As you look at your family’s leadership succession, some of the questions worth asking are:

01. Is there a clear long term vision for the business and the role of the family within the organization?

02. Do we have a family governance structure in place?

03. Does the business have the right professional (executive and non-executive) talent mix for emerging challenges and opportunities?

04. Do we have a formal development plan for the next generation?

05. Have we adequately considered private equity as a potential strategic partner for growth?

06. What is the right balance for us between nurturing our existing businesses and investing in new areas?

07. Are we able to leverage our competitive strengths to drive an impactful ESG agenda?


The authors would like to thank their colleagues Michelle Chan Crouse, Alvin Chiang, Adelin Choy, Manisha Sharma and Dheeraj Vashista for their many contributions to this paper.


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