PASSING THE BATON

Succession planning helps ensure uninterrupted leadership

Every parent wants their kids to have it easier than they did. Especially if they've built an empire, right? But handing it off isn’t just about cash. It’s about keeping the family legacy alive. It’s like passing the torch, but without the risk of burning your fingers. That’s where succession planning comes in – it’s the roadmap to a smooth handoff, so the business doesn't crumble and the family stays strong.

Recently, Indian billionaire Gautam Adani revealed details of his succession plan for his vast business empire. When a tycoon of his stature discusses a sensitive topic like this, investors should sit up and take notice. If you're in it for the long haul and want to pass your wealth down to the next generation, you need to pay attention to succession planning in publicly traded companies. Let's break it down.

WHAT IS SUCCESSION PLANNING?

Most people think of wills and trusts when they hear ‘succession planning.’ While wills and trusts are helpful for individuals transferring wealth to the next generation, succession planning in corporations is a much more intricate process. It’s a key part of a company’s strategy, ensuring a seamless transition of leadership at all levels. At the top, succession planning not only guarantees a smooth change of control but also can alter how a company operates and how it treats minority shareholders.

Succession planning in the corporate world is far more complex than simply passing on assets to a chosen individual. It often involves the next generation of a promoter stepping up to take the reins.

In today’s world, however, it’s increasingly common for a promoter to entrust the responsibility of running the business to a professional manager from outside the family, rather than a biological heir. In some instances, promoter-managers are replaced by a team of professional managers. Each of these scenarios warrants a closer examination.