How family businesses can scale to listed trillionaire firms

Family businesses are the backbone of many economies around the world, making up a significant portion of the private sector.

To transit to listed trillionaire companies, business executives have identified strong corporate governance, the right family values, technology, and transition structures as indispensable for a sustainable future.

For family-owned businesses and founder-led startups, a listing on the Nigerian Exchange Limited (NGX) is a significant milestone. It is an opportunity to raise fresh capital, attract new investors, and enhance market reputation, according to business executives who spoke at BusinessDay’s Family Business Summit 2023 on Thursday.

However, for it to be successful, they insisted some key issues ought to be addressed.

“Structures have to be put in place before a family business goes public. Before listing on the Nigerian Exchange Limited, the firm must have the right governance, a proper board that directs the affairs of the business, and comply with the necessary regulatory guidelines and specific guidelines that relate to the industry,” said Abiola Adediran, co-founder of GENEA, said at the event, themed ‘Build to last: Building a multi-generational business in an age of volatility’.

Toyin Sanni, CEO of Emerging Africa, said there should be innovative structures in place that can preserve the interest of the family.

She cited Google and Facebook, saying they have classes of shares that only the members of the founders will hold on to which preserves the family interest.

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“Family businesses must partner with other family businesses that are like-minded with similar values,” Sanni said.

“There are private equity firms who have partnered with family businesses that provide the right capital they need but they need to pick these firms carefully,” she added.

Concerning listing on the NGX, she said: “There should be a transition in phases where your first IPO [initial public offering] will involve selling a certain amount of equity, while you retain enough to ride with.”

“Family businesses should make the right investment in technology; there is a need to transition from old habits to new habits to long-term sustainability,” Tunde Coker, chief executive officer of Open Access Data Center, said.

He said family businesses should be open to the views of professionals in the field they operate in about how to grow the business.

“Governance is very important, and fundamental technology, and certifications the firms need to have,” Coker said.

Niyi Yusuf, chairman of the Nigerian Economic Summit Group (NESG), said every organisation needs to have a sense of impacting the community.

“Environmental, Social, and Governance (ESG) needs to be put in place and it starts with an organisation having a good ESG plan in place,” Yusuf said.

“Community development depends on what you want to do in the environment, then you can monitor it,” he said, adding that ESG is a requirement that will help to institutionalise and sustain a business.

A recent PwC survey on Nigerian family businesses showed the country’s next generation believes driving family business growth by adopting technologies and upskilling is a top priority after the COVID-19 pandemic.

“Over half of Nigerian NextGeners see business growth and expansion as a key priority over the next two years,” PwC said. “This is followed by expanding into new sectors or markets (43 percent) and adopting new technologies (43 percent). Digital upskilling ranked higher as a priority in Nigeria (42 percent) over the global statistics (39 percent).”

Esiri Agbeyi, partner and family business leader at PwC, said family businesses are unique as they have to deal with the financial elements of growth and emotional elements which can be tough but also be their leverage.

“Nigeria’s NextGens are keen to play their part but cite resistance from the current generation to hand over. Regardless, the families agree that growth is a priority to create value for future generations,” Agbeyi said in the report.

“The NextGens also recognises that it will take new approaches and skills after the pandemic and with the threat of climate change. NextGens will have to develop their blueprint for success and push boundaries to challenge years of established thinking,” she added.

Family businesses contribute $200bn to economy yearly – FG

Family businesses contribute nearly $200 billion to the Nigerian economy each year, according to Jumoke Oduwole, special adviser to the president on ease of doing business.

“These figures reflect the glaring significance and the impact that family businesses have on Nigeria’s economy and the need for us all to ensure the sustainability of our multigenerational businesses,” she said.

Oduwole said the government has been working to make Nigeria a progressively easier place for businesses to be established and to grow, with a focus on the micro, small and medium enterprises sector.

She said the Presidential Enabling Business Environment Council (PEBEC) has worked on reforming the regulatory environment which removed bureaucratic and legislative bottlenecks across the business climate, the establishment of an Executive Order on transparency and efficiency in public service delivery. This Executive Order has now been codified into the Business Facilitation Act of 2022, she added.

“PEBEC is also working on the re-enactment of the Companies and Allied Matters Act and the Business Facilitation Act and partnering with state governments to deepen the reforms that it has been working on at the federal level. This partnership, known as the State Action on Business, Climate and Business Environments program, is a three-year program with a $750 million budget,” she said.a

Martin Roll, a global family business and family office expert, said family businesses need to have clear and mandated rules of how they play in order to create a long-term strategy that lasts between generations..

Sam Abu, country senior partner at PwC Nigeria and keynote speaker, said only 38 percent of next generation family members are involved in family business. He said succession is one of the challenging factors that affect the success and sustainability of family businesses in Nigeria.

He said: “Only 25 percent of family businesses in Nigeria have a succession plan, only 6 percent have ESG statements compared to 12 percent in Africa, almost 60 percent of Nigerian family businesses acknowledge that they are not strong in digital capabilities but only 34 percent deem it a priority and only 15 percent have established conflict resolution mechanisms.”

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Speaking on how to achieve sustainable growth, Abu said: “Identify your family’s shared purpose, mission, and values, Pinpoint the key family members and stakeholders involved in decisions and for whom you are seeking continuity, specify your growth goals, and ensure alignment with your ‘why’ and ‘who’, put governance mechanisms in place to enable effective decision-making in executing growth plans, and have the right talent and operations to achieve your goals.”

Oyeyemi Oke, managing director 1st Fiduciary Limited, said that establishing a family office can help to structure the transfer of wealth and take care of the needs of the family, especially the education of the next generation.