Australian private and family business owners are twice as likely to sell up rather than hand over to the next generation compared to their international counterparts, a new report by PwC Australia has found.
PwC’s Once in a Lifetime report found 31 per cent of private and family businesses plan on selling, compared to a global average of 17 per cent.
Of those surveyed, 69 per cent of private and family business owners are planning to sell or pass on their business, that’s 350,000 businesses changing CEO or ownership.
Private and family businesses currently employ more than 3 million Australians, expected to rise to 4.5 million employees in the next 10-15 years, and contribute $600 billion, more than one third, to the nation’s GDP.
PwC Australia’s Private Leader Sanjiv Jeraj says in Australia most private and family owned businesses have been created by baby boomers who are now looking to sell as they enter their 50s and 60s.
“Culturally in Australia parents are telling their kids to go to university and get an education to look after their lives,” he says.
“Typically people have worked and they are selling their business to enjoy the fruits of their capital and will give some capital away to their kids and other family members to set them up.”
Mr Jeraj says interest is coming from inbound investors – especially Asia, private equity or large publically listed companies.
He says there has been increased interest from foreign investors into Australia’s health, services and food business sector.
“Even if they don’t sell out completely, owners are taking advantage of the opportunity to partner with Private Equity by selling down part of their ownership now and sharing in the enhanced return down the track when they sell out completely,” Mr Jeraj says.
The report found while 38 per cent of businesses want to handover the reins of the company to the next generation, 83 per cent of these did not have a succession plan in place. This is a gap at a time when 70 per cent of business transitions fail between generations, with only 5 per cent surviving to a fourth generation.
It found more than 50 per cent of Australian private and family business owners view the current economic environment as a threat, while 25 per cent see government policy as a challenge.
Mr Jeraj says transferring business ownership is one of the biggest challenges facing both business owners and the broader Australian economy.