Europe globe's top breeding ground for large family businesses

04 April 2019 Consultancy.eu

Family businesses are an integral part of economies, contributing significantly to output and supporting a large number of jobs – particularly at the SME level. Family businesses can also be big business – some of the world’s largest businesses are still controlled by founding families. New analysis of the world’s top 500 family businesses shows that Europe is the globe’s top breeding ground for family businesses.

An analysis by EY on the world’s largest 500 family run companies, by revenue, finds that nearly half (46%) of the globe’s largest family-owned companies are based in Europe. To be classified as a family business, the researchers looked at ownership of companies (must be majority owned by a family), board structure (there must be at least one family member at board level) and history (the firm must be a second generation led family business at least).

The number of European firms in the top 500 increased from 224 in 2017 to 230 this year, boosted particularly by new entrants from Germany. North America – the US and Canada – hosts 31% of the world’s largest family businesses, a 1% decrease on the previous period, while Asia remained unchanged on 19% of the total. There are two companies headquartered in Oceania, as in 2017; Africa continues to be home to four firms; South America sees a slight reduction from 22 companies in 2017 to 20 this year, while Africa represents 1% of the total.

Geographic distribution of family businesse

A top 500 family business globally has average revenues of around $14.9 billion, up from $13.6 billion two years ago, and 48,920 employees. The average age of the firms is roughly 80 years.

The largest number of family businesses in the top 500 are active in the consumer products sectors, at 31%, followed closely by advanced manufacturing & mobility sectors, at 24%. Smart infrastructure is the third largest industry, at 14%, followed by energy, at 10%.

Board structures

The researchers also looked at board compositions at family businesses, finding that younger firms, such as new entrants to the top 500, are more likely to have external experts in their top ranks. “Newer, younger companies are more likely to harness the expertise and perspectives of external directors from outside the family,” said Marnix van Rij, EY’s Global Family Business Leader, adding, “but they also have less family members to draw from than family firms in the third or fourth generation.”

Overall board level diversity of family members was low. For instance, overall 27.6% of boards surveyed comprised family members, and by-and-large all of them were male – 22.9%, leaving 5.4% female. New entrants were slightly more likely to have female family board level representation, at 6.8%, however, they were less likely overall to have board level family representation at 23.1% of those surveyed.

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