Challenges, Success And Succession: Family Business In Malta

Jo Caruana - 16th September 2018

A closer look at the unique challenges – and opportunities – faced by the family business community in Malta.

There is literally a family business on every street in Malta. From the dinky grocery shop handed down from generation to generation over decades, to the vast retail, entertainment, property and construction companies run by fathers, mothers, sisters, brothers and other relatives, it is no surprise that 75 per cent of all businesses in Malta are actually family businesses.

“Often described as the soul of the economy, family businesses hold a crucial role in the economic growth of any country,” states Chamber president Frank V. Farrugia. “Through history we have watched great family businesses establish themselves in their local contexts; some have even managed to break international ground and become world-renown house-hold names. Family businesses have a special place in the public consciousness. Very often, admiration is mixed with awe for the genius behind such ventures, as their achievements are widely respected.”

Frank V. Farrugia

Frank V. Farrugia

It is with this in mind that the Chamber decided to organise a day-long conference dedicated entirely to family businesses. “As an organisation, we have a great debt of gratitude towards family businesses,” Mr Farrugia continues. “In fact, historically, a huge majority of the businesses that have made up the Chamber’s membership were predominantly family-owned – a trend that persists today. These businesses, which include brands and products that every Maltese family is familiar with, have been the backbone of the Malta Chamber and are synonymous with the 170-year old organisation.”

Among those with a solid background in family business is Joseph Zammit Tabona, the director of the Xara Palace Hotel Co. Limited and Infinitely Xara Limited. He explains that his side of the Zammit Tabona family has been involved in various businesses since around 1860 but, on each occasion, the family business never went beyond the second generation. His family’s background covers everything from shipchandling and selling beer to the navy, to managing the franchise of Pepsi Cola under the Malta Bottling Co Limited, the Crown Corks Company and the Malta Steel Co Limited.

“I personally went into the accounting profession and ended up as a senior co-partner of one of Malta’s leading accounting firms until my retirement in March 2000,” Mr Zammit Tabona says. “My wife Susan and I always had our eye on the Xara Palace in Mdina, which we acquired on 6th April 1996. It took us three years to restore the premises to its former glory and we opened our doors to the general public in June 1999. We are now in the second generation as the Xara Collection is run by our children, Nicola and Justin. Today we place a great deal of emphasis on ‘tender loving care’ and ‘family spirit’; it’s a huge part of what we do.”

JZT

Joseph Zammit Tabona

Asked about the challenges of running a family business, Mr Zammit Tabona highlights the limited resources and the constant effort required to seek the support of bankers. “When we were developing the Xara Lodge, the entire project was being financed through our principal bankers,” he explains. “When we came to finish this project – with the global financial crisis at its worst – that bank refused to finance the last €2 million, although we were fortunate enough to find another bank willing to provide me with the sum personally. It wasn’t an easy project but, looking back, I am proud of what we achieved as a family, and especially of Justin who was responsible for the concept, development and marketing. Today we are a household name and our strength lies in the fact that we all pull the same rope, are dedicated and involved. We continually look at new opportunities so as to best develop the Xara Collection into the future.”

As someone who has grown up in a family business, Denise Micallef Xuereb, the director of construction at AX Group, is also very passionate about what family businesses bring to the market.

“Our company had already developed from a one-man-band into a structured group of companies by time the second generation family members started working in the business,” she details, adding that AX is diversified into four core divisions: construction, development, healthcare and hospitality. “Our parents gave us the liberty to choose whether we wanted to work in the business and we weren’t forced into it, but we developed within a culture of ‘working through the ranks’. For instance, both my sister Claire and I have worked across all the different hotel departments – little did I know that I would venture into the construction world instead!

“Today, despite still being a family business and keeping family spirit at the core of our operations, we operate very much in a corporate and structured environment – so much so that we now have various boards, as well as a CEO who is not a member of the family.”

Denise Micallef Xuereb

Denise Micallef Xuereb

Speaking about succession planning – the important matter of planning how successive generations will take over from the generation currently in charge within a family business – Ms Micallef Xuereb explains that the AX Group has been planning this aspect for a number of years. “In fact, we have adopted a number of corporate governance measures, introduced a number of boards with executive and non-executive directors, introduced audit committees, and are structuring roles and responsibilities across all levels. We believe it will help us to ensure the right checks and balances are in place when we need them to be.”

As for her advice for other family businesses, Mrs Micallef Xuereb stresses how important it is to differentiate between family and business. “It is such a fine line,” she says, “and that can prove very tricky. Thankfully, keeping family situations for family and treating work as work has been beneficial in our case.”

Meanwhile, as the Regulator for Family Businesses within the Ministry for the Economy, Investment and Small Businesses, Nadine Lia is only too familiar with both the challenges and opportunities faced by family businesses. As regulator, her role is primarily to assist, support and provide assistance to all family businesses in matters intrinsic to them. “Our work involves representing family businesses, as well as promoting and working towards new policies and incentives,” she explains. “The work also involves registering family businesses so that they may benefit from the numerous incentives and schemes available to them. Our aim is to provide a platform for family businesses to come together and provide a comprehensive service that ensures their sustainability and longevity.”

Ms Lia continues to explain that family firms require a specific understanding of how mixing business with family results in unique characteristics. “Those who deal with businesses in the absence of family influences are often uncomfortable when confronted with family businesses,” she says. “And yet family firms enjoy advantages over other businesses too.”

Nadine Lia

Nadine Lia

Of course, succession planning is also a vital part of the service that the regulator offers. “Succession is fact of life,” Ms Lia stresses. “It will happen whether the business wants it to or not, and often when least expected or desired. Successful succession, on the other hand, will occur if it is wanted and will not come as any surprise if planned properly and early enough.  The earlier you plan succession, the more the founder can plan and strategise about how they would like their business to grow. Beyond that, they can also plan their retirement and pension to ensure they maintain and provide for their lifestyle. This also gives them the time to plan the transition and distribution of finances and assets, while the next generation have their minds at rest that their livelihoods are not jeopardised by a sudden demise of a family member. Early and thoughtful planning allows the family members to clearly define their roles, and also it allows the same family members to acquire the skills and character development needed to take over.” 

Naturally, all of this ties in brilliantly with the topics and subjects that will be covered at the upcoming conference – an event that Ms Lia highly commends. “Both the Family Business Office and the Chamber of Commerce have the best interest of family businesses at heart and this conference is proof of that. Family businesses are the backbone and driving force of a robust and resilient economy, and the aim of this conference is to give family businesses an opportunity to get together, discuss and gather useful information in the carrying out of their endeavours with the full of support of the Family Business Office and the Chamber of Commerce. We look forward to seeing as many members of family businesses there as possible,” she concludes. 

A Family Affair – Safeguarding Malta and Europe's Beating Heart

Organised by the Malta Chamber of Commerce, Enterprise and Industry, ‘A Family Affair – Safeguarding Malta and Europe’s Beating Heart’ will take place on 1st October, and will celebrate family businesses and their achievements as well as examine their future.

Among other topics, the conference will discuss themes revolving around issues of shareholding, structure, governance, procedure, finance and succession.

The attraction of the conference shall certainly be the participation of heavy-weight international names, whose family businesses have become world-wide house-hold names.  In fact, the Chamber is proud to have secured the participation of speakers from global players such as Ferrero SpA, Grimaldi Lines SpA and Buffa SpA.

Ferrero Chief of Research and Development, Briano Olivares, Grimaldi Lines Executive Manager, Eugenio Grimaldi and Buffa srl founder Paolo Buffa, are expected to share their experiences running some of the world’s most recognisable business brands, and how they managed to reinvent themselves to maintain and consolidate their market share.

They will be joined by members of leading family businesses from Malta, namely Denise Xuereb of AX Holdings Ltd, Joseph Zammit Tabona of Infinitely Xara, Benjamin Tabone Grech from Engel & Völkers Sara Grech Malta, as well as Peter Borg from Bortex Group Holdings.

The event that will be opened by Minister for the Economy, Investment and Small Business Hon. Christian Cardona, shall feature speakers from Bank of Valletta plc, HSBC Bank Malta plc and RSM Malta, together with Dr Nadine Lia from the Family Business Office, who shall be shedding light on support available for the family business model.

This article originally appeared in The Commercial Courier


17th September 2018

Singaporean companies expected to announce operations extending to Malta in the coming days.

Sarah Micallef - 15th September 2018

With Malta's population increase mainly due to net migration, the experts weigh in on the benefits for local business, as well as the challenges Malta faces as a result.

14th September 2018

Prof. Scicluna explained how the current favourable economic climate and the political will to strengthen the EMU has created a unique window of opportunity to make the currency union more robust.

13th September 2018

Moody’s warned that the risk of a no-deal Brexit had risen materially in recent months, and that if it came to pass, it could lead the UK into a recession.