To Sell or Not
To Sell the Family Business? aye that is the question!
The answer is
not found within the financial nor the legal aspect. It is within
understanding the needs of the individual, the family and the business.
Last
week I received a call from “Juan” who told me his attorney had
found the perfect buyer for his business. Juan had always said that
selling the business would be his last resort. Juan is 78 and his wife would like him to retire. Juan took
over his Dad’s business about thirty years ago with his sister.
Juan’s skill as an entrepreneur plus endless hours and a bit of
luck had created an enterprise with well over 1000 employees, social
stature and wealth.
His
sister became aggressive about 10 years after Dad died.
She wanted more and more dividends and questioned his secretive
way of doing business as well as his bookkeeping methods.
This conflict ended with a fairly lengthy and costly lawsuit
which Juan won. Juan has
not spoken to his sister since that time.
Juan says, “I always told her the truth, but it never mattered
to her. Now, she has
nothing.”
Although he loves his children , he distrusts his older son’s
business leadership. “Paul
just doesn’t want to work that hard.” Juan lamented. Not only that,
I don’t think the managers respect him.” Juan added.
Lately his son-in-law, the CFO,
has been complaining vigorously to him about Paul.
Juan’s three children seem to be constantly fighting and
although Juan could mediate these conflicts, he has no faith in their
ability to resolve conflicts on their own.
Juan’s middle son, Gerry, quit the business years ago, stating,
“Dad will never share the decisions, nor will he ever retire.
I’m better off somewhere else.”
Gerry went to work in another industry, and although not rich, he
supports himself and his family. Mary,
the youngest, married Tom, whom Juan hired against the objections of
both his sons. Tom
is the CFO and has done quite a good job in Juan’s eyes.
Juan
loves his grandchildren, two of whom (ironically, the children of Gerry)
are already working in the company.
Both of them have MBA’s and are quite serious about business
and developing the company’s markets.
The business has struggled
the last three years. About 2 weeks ago, Juan had a coffee with his
son-in-law Tom. Tom made it
quite clear that in his opinion the major blocks to growth in this
company was Juan’s son, Paul. He
gave several examples of key managers now refusing to speak to Paul.
Later, when Juan brought this to Paul’s attention, Paul replied “Of course these managers are mad at me because I’m on
their case to produce more. Dad,
they are just using Tom to try to get back at me.
And Tom, obviously wants you to fire me.”
Dad and Paul had a significant argument at this point.
The relationship has been cold since then.
Juan
is tired at the end of each day. He
sees his family falling apart. Last
Christmas, it was clear that kids did not really want to show up.
They argued about the time of the meal, when each would arrive
and what food each would bring. Juan’s
wife handles all this, but he can see the increasing strain on his wife.
The in-laws seem not to get along.
The business has been Juan’s life. It is the legacy given to
him by his father.
Juan asks “Why should I give up my dream because my kids are
immature
Juan
had already consulted his attorney, an investment banker, a financial
and estate planner. Each
had given him a lengthy answer promoting the sale of the company for
financial and estate reasons plus intricate details for tax savings.
Although this is a correct business decision, Juan feels unable to find the “right” solution. No
surprise – the answer lies not in financial or legal analysis! Rather the answer lies in understanding the needs of three
systems and looking at their interrelationship.
The
three systems of course are the Individual, the Family and the Business.
Each system is in a growth stage (we hope!) and has emerging
needs. For Juan to find the
“answer” to his question he might begin by asking himself and his
family the following:
What
kind of family do we have now?
What
kind of family do we want in the future?
What
are our individual hopes and life plans?
What
is the business’s short-term and long-term financial projection?
What
kind of Leadership and Governance Structure facilitates the business’s
growth and family harmony?
What
kind of Ownership structure in the future best supports business growth,
family harmony and individual goals?
How
does the family not repeat the legacy brother against sister?
If
we were to sell the business, would our family fall apart?
There
are many more questions to be discussed in this family. The need is for
Juan and each family member to use this moment in exploring deeply and
honestly each person’s needs and desires. The underlying question is
does the family have the trust and emotional strength to have this kind
of dialogue? If not, Juan
and the family may never find a “satisfactory resolution”.
