This year’s BIZIT, a summit of family companies of its own kind not only in Serbia but also in the region, was held in early March 2020. At that time, Serbia had already begun to feel the consequences caused by the Corona virus; however, this phenomenon neither affected the presence of interested entrepreneurs as proved by full conference hall, nor the presence of lecturers (including myself) who transmitted to the audience their knowledge and experience, each one from his/her specific area: organizational, legal, fiscal, etc.
On the other hand, those of us who are sensitive to the sector of small- and medium-sized enterprises (SMEs), composed mostly of family companies, were offered an opportunity to hear the founders, managers and successors to these enterprises and to get familiar with the difficulties and issues they are encountering and the mode of how they are planning to solve them.
The most important issue relating to family companies of the majority of the gatherings I have attended was the business transfer. It principally involves the transfer of ownership from the founders to successors, if existing and if wiling and able to assume and take over the leader roles of the founders. Not managerial roles but those of leader. Because the leader is the person who sets up the structure of an organization or who adapts the same to the new, significantly changed circumstances. Owners of the family companies in Serbia are leaders, self-educated, self-made and adaptable to the dynamics and non-foreseeability of the domestic market.
To summarize, the experience shows that in the majority of cases the founders transfer business to their family successors, but also to managers/employees or „external“ investors.
Conservative founders tend to leave their companies to the family heirs. Transfer to managers / employees is exceptionally rare because the question involved is the source of financing needed for taking over a company by a manager / employee, which question can hardly be responded in Serbia. On the other side, the transactions involving strategic or financial investors, the foreign in particular, and their take-over of family companies in Serbia has been relatively vivid over the past couple of years. The process of purchase/sale of a company is rather complex and long-lasting and TPA was as a company included in a series of education platforms that were explaining in a greater detail to family companies’ owners the mentioned process and concepts such as: „teaser“, information memorandum, „due diligence“, etc.
One of the views we used to advocate in such educations is that a sale of a family company needs not be taken as a defeat of the founder. In most cases it is the best possible sequence of events for the company as such. Needless to say, it would be much better for our economy if domestic companies consolidated their industry more aggressively in the region and if they were the buyers, but it has not simply happened in a significant number.
Looking from a macro perspective, family companies were just those that in the previous period were “failing” in the sense of making contribution to the Serbia GDP. Domestic private investments account for about 10% of GDP and were in percentage terms by 1/3 smaller than in other Central and East European countries or, in other words, of relatively comparable countries.
Albeit nominally equalized with foreign investors in the sense of the regulations applicable to them, meaning primarily in the sense of various subsidies (fiscal, financial, etc.) that Serbia is granting to investors, foreign investors were, in practice, the „stars“ winning the “battles” as a general rule. I am using here the expression “nominally equalized”, but when one looks at the conditions that must be fulfilled in order to be granted a financial subsidy by the government, it is clear that it is easier and faster for multinational companies that operate in several or in several dozens of countries to meet those conditions than it is the case of a Serbian entrepreneur.
It is worth mentioning the fact that in 2018 Serbia had, for example, more than 100 projects of foreign “greenfield” investments and was among the leading destinations for foreign investors in the world, taking into account the size of the economy. Excellent news! Working with foreign investors for more than 15 years, I am a witness of their multiple benefits we felt in Serbia.
Leaving aside the macro analyses, many business processes and standards of behavior in business applicable currently in Serbia have come precisely from abroad after the year 2000. At the end of the day, a large number of family companies is vertically related in the chain of production with large multinational companies, and are basing their earnings on that relationship.
Today, however, due to the newly created situation, some fully different topics are on the agenda of family companies in Serbia. Taking into account the existing and expected economic consequences caused by global and local slowdown of economic processes, Serbian SMEs sector is reviewing itself, its liquidity, buyers, suppliers, legal challenges, etc., and is expecting adequate measures of support from the Government. Adequate measures involve a fine, delicate shading per industries (not all industries are equally affected), but also a fine shading per financial power (the capacity of companies to survive with smaller earnings in the forthcoming period). According to the first announcements, the Government has prepared an all-inclusive and complex set of financial and fiscal measures that will be formalized through adequate decisions of the Government in the first half of April 2020.
My hope is it will also be a beginning of a higher level of partner relations between family companies and the authorities and that the upcoming crisis will apart from challenges also bring to the family companies in Serbia the support and recognition they deserve.