New Delhi: More than a quarter of them are open to the idea of getting in private equity to fund their new ventures or expansion plans. Some, like the Nirulas for instance, have even offered controlling stakes in their enterprises to their PE partners.
A little under a fifth think M&As and joint ventures are a good way to grow their business, and even here, many are amenable to accpeting a minority role in the new arrangement.
But ask the typical Indian entreprenuer if he wants to sell out, and he’ll probably retort: ”Thank you very much, but we can manage the company better than anyone else.”
Findings from Grant Thornton’s International Business Report (IBR) says only 10% of business owners in the country expect a change in the ownership of their companies in the next decade, compared to 28% of businesses worldwide that expect to see such a change. As a matter of fact, India is placed at the bottom of a list of 32 countries, across which 7,200 business owners were interviewed.
The annual survey found that business churn is expected to be the highest in South Africa (52%) followed by New Zealand (51%), Canada (50%) and the Philippines (48%). Among companies expecting a change in ownership, a quarter of businesses globally expect this change to occur within the next two years.
The greatest change in attitudes to business ownership is in the Philippines which has seen the expectation of a sale in the next ten years grow from 6% in 2005 to 48% this year. In contrast Indian business attitudes have remained static over the same period and are least likely to change hands, with only one in ten owners expecting to sell in the next decade.
While most Indian businesses don’t see a change in ownership in the next decade, they are open to trade sale, private equity, initial public offers.
• 28% of Indian businesses are open to trade sale
• 28% are willing to get in Private equity
• 14% have IPO plans in the next couple of years
• 18% want to sell or pass on reins to family members
• 16% expecting management buy outs / buy ins
• 8% open to passing on stakes to employees as stock options
• 18% open to M&As / Joint ventures
Vishesh Chandiok, national managing partner, Grant Thornton India, said: “Our findings show an overwhelming expectation of change in the structure of privately held businesses in the coming years. A change in ownership can have a major impact on the strategy and operations of a business, affecting long–standing practices and employment patterns. Business owners need to start planning carefully for the future and seek professional advice to consider their options.”
Pace of change
The survey of 7,200 business owners in 32 countries also found that, of those businesses expecting to change hands, 25% will do so within the next two years. The greatest opportunity for involvement in a business exit is in Germany, with 39% anticipating a change in ownership within the next two years, followed by South Africa (38%) and Sweden (37%). Globally, over the next decade, the majority of privately held businesses expecting a change (48%) expect it to happen in the next five years. However, 67% of surveyed businesses in the Philippines are expecting a change of ownership in a slightly longer time period of six to ten years.
Type of change
Globally, a trade sale (25%) is the most likely future of a privately held business, followed by private equity/bank finance (20%), and management buy out/buy in or mergers (both at 16%). Sale or transfer to a family member is the expected outcome for 15% of these businesses internationally; however, there remain exceptions to the rule in countries such as Canada where 33% see this as the most likely form of change of ownership.
About the IBR
Grant Thornton International started a major annual survey of the attitudes and expectations of small and medium-sized businesses in 1992 called the European Business Survey (EBS). In 2003 the research project was widened to an international perspective covering medium-sized businesses and renamed the International Business Owners Survey (IBOS).
In 2007, the survey’s name was changed from IBOS to the International Business Report (IBR). The IBR survey draws upon 15 years of trend data for original EBS participants and 5 years for original IBOS countries. 15 year trend data is available for: France, Germany, Greece, Ireland, Italy, the Netherlands, Poland, Spain, Sweden, Turkey and the UK, while 5 year trend data is available for Australia, Canada, Hong Kong, India, Japan, Mexico, Singapore, South Africa and the US.