26 July 2007
Fifty-two percent of privately held businesses in South Africa expect a change in ownership over the next 10 years, the highest among 32 countries surveyed in Grant Thornton’s latest International Business Report.
South Africa’s high rate of ownership “churn” related directly to black economic empowerment (BEE), Grant Thornton SA chairman Leonard Brehm said in a statement this week, and meant that South Africa currently offered “the greatest opportunity for a new generation of business leaders”.
Grant Thornton’s survey was conducted among medium to large businesses in 32 countries, covering more than 7 200 respondents. In South Africa, 200 businesses employing between 100 and 400 people were surveyed.
The survey found that of those SA businesses expecting to change hands, 38% anticipated doing so within two years, 51% between three and five years and the remaining 11% within 10 years.
Ownership churn has increased since Grant Thornton’s previous survey, conducted in 2005, when 47% of South African respondents expected a change in business ownership within 10 years.
“The expected churn reported by South African businesses relates directly to black economic empowerment (BEE),” Brehm said in a statement.
“With the BEE codes of good practice now gazetted and business ownership providing some of the highest points on the scorecard, a change in business ownership makes sense for many people looking to ensure their businesses’ sustainability.”
When asked how respondents expected the change in business ownership to take place, 45% of South African respondents answered by sale to employees, followed by management buy-out or buy-in (35%).
According to Grant Thornton, these findings support Brehm’s view on ownership churn in SA since, globally, trade sales (25%) are the most likely future of privately held businesses, followed by private equity or bank finance (20%) and management buy-out or buy-in or mergers (both at 16%).
Sale or transfer to a family member is the expected outcome for 15% of businesses, with sale to employees (10%) the least likely means of change of ownership.
“This means that South Africa currently offers the greatest opportunity for a new generation of business leaders,” Brehm said.
Globally, 28% of privately held businesses are expected to change hands within the next 10 years, 25% of these within the next two years.
Following South Africa, businesses in New Zealand (51%), Canada (50%) and the Philippines (48%) are the next most likely to witness changes in company ownership over the next 10 years, the survey found.