Mace & Jones corporate law partner Ian Hodgkinson, has worked on a number of family business deals this year. He pointed to new data from the Centre for Management Buy-out Research (CMBOR) which shows a leap in the number of family buyouts, with 36 taking place in the North West in first nine months of 2008, compared with 35 for the whole of 2007.

“A lot of deals are being done with smaller, owner-run businesses which shows the in-built strength of the sector which employs an estimated 9.5m people (see notes to editors),” he said. “However, the critical point is still that not enough family run firms are planning for the future. An estimated 100,000 businesses pass out of family control each year because of the failure to draft succession plans or business pressures. According to the BDO Guide to Family Business, only 24% of UK family businesses survive through to the second generation and only 14% make it beyond the third. This is a major problem and given the current climate we need to encourage more family run firms to prepare their succession planning.”

Hodgkinson said statistically family owned firms contribute massively to the economy and  can be found in every sector of commercial activity.

“Failure to plan leaves a ticking time-bomb,” he said. “Handing a business over to a younger generation requires a measured and gradual shareholding process. This succession planning takes years rather than months.

"We would urge companies to periodically review the top positions such as chief executive, director and chairman  to determine back-ups for each senior position. If the next generation is suited to the senior roles, then this group should start with a small shareholding in the family business. They can then – once fully trained – buy shares from the older generation through the company itself, either in stages or all at once, which eventually leaves them with the only share in the company.”

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