Gen-next, building their own identity
For the inheritors, getting into the family business may come with its own challenges but deciding to branch out on their own is also not an easy task. To begin with, you will be compared with your parents at every stage of the journey. And, you have pretty large shoes to fill. But this has not stopped the next generation from venturing into uncharted territories and building their own identity.
Take, for instance, Kavin Bharti Mittal, 29, son of Sunil Bharti Mittal, who, along with his family, has a net worth of $8.4 billion (around Rs53,760 crore). He is more interested in building products for mobile internet rather than joining his father’s telecom business, Bharti Airtel Ltd. Bitten by the technology bug when while in his final year of college in the UK, Kavin, along with his classmate, founded AppSpark and later launched Movies Now (for booking movie tickets), and Foodster (a food recommendation app). In 2012, he launched messaging app Hike Messenger. Currently, there are no synergies between Hike and Bharti Airtel.
Many families encourage their children to try new things. According to Anshu Kapoor, head, private wealth management, Edelweiss Global Wealth Management, many families, while inducting the next generation into the business, have a compulsory stint for Gen-Next outside the group business. “These experiences provide the Gen-Next with an opportunity to learn and opens them up to other business models that exist outside the group. Also, once the next generation enters the business, many families encourage them to come up with their own business ideas, which can propel the growth of the group business. Such practices act as motivational triggers to the next generation: an opportunity to prove their mantle within the family,” says Kapoor. The concept of working outside the business holds true for Mittal too—he interned at McLaren Racing, Google and Goldman Sachs while at college.
Another example is Shruti Shibulal who moved back to India after working as a chartered accountant with Merrill Lynch in New York. Director of strategy and development at The Tamara. Daughter of Infosys co-founder S.D. Shibulal, she ventured into the hospitality business in 2012 with fine-dining restaurants Caperberry and Fava in Bengaluru. The Tamara, which runs 10 properties in south India and Germany, including those under construction, recently launched its affordable hotel chain Lilac. Tamara Coorg, its flagship property launched in 2012, has won several awards.
According to Bernard Fung, managing director, head of wealth planning services, Asia Pacific, Private Banking, Credit Suisse, “Generally, we observe that business families encourage their next generation to be involved in the family business not just to further a legacy, but also to develop their entrepreneurial spirit in taking the family business to new areas, which could be in lateral markets where their existing strengths can be leveraged in new ways, or to other verticals.
“Most of the time, the founder patriarch or matriarch who has built a business from almost nothing and who continues to see growth opportunities in his greying years usually has every incentive to encourage the next generation to continue the family’s business legacy,” says Fung.
However, sometimes, family businesses can evolve and take a different direction. “In our experience, it also depends on what one means by ‘the family business’. In the context of one or even two generations, a ‘family business’ evolves and can become something quite different from what the founders started with. An example might be a family that began as a plantation business in the first generation may morph into a property development business as the second generation seeks to capitalize on the scarcity of housing and urbanization trends. Another example might be that of a family business that began as an original equipment manufacturer for a foreign multinational, morphing into a branded consumer goods company,” says Fung.
Other than entering new businesses, there are companies that are looking to buy out stressed assets and making investments in technology firms. “Technology is one area where the next generation is very open to exploring—these initiatives may include financial investments in tech companies or strategic investments with a view to drive the business. Also, in some of the new families that we have interacted with, they are increasingly looking at buying out stressed assets/businesses (at discounted valuation) from banks or asset reconstruction companies,” says Kapoor.
According to a Credit Suisse Research Institute 2015 report, “The Family Business Model”, which analysed more than 900 family-owned publicly listed companies of at least $1 billion globally, compared to non-family-owned businesses, family business growth is largely organic rather than acquisition-led. However, where they do grow via acquisitions, family-businesses make better and cheaper acquisitions as they drive better growth and returns in the three-year period post-acquisition.
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