Selling the Family Business
Since the most important thing to us was to maintain good feelings within the family, it helped to have a banker who had experience helping parties with potentially difficult internal conversations.
My father and I founded our company many years ago and we were fortunate to maintain ownership inside the family for a long period of time. His retirement from day-to-day operations presented many opportunities for both of us, but also some challenges that we hadn’t contemplated: How would we fairly get him liquidity for his ownership, when was the right time to consider a transition away from family ownership, who to help us decide what was best for all of us?
For a number of years we began buying his shares with excess cash in the company, but that provided a slower liquidity path than what he had hoped for. After looking at a number of other options such as taking on a minority investor or restructuring the company through an ESOP, we decided to seek an acquirer. Here are a few key takeaways from our experience:
The Importance of Hiring an Outside Advisor
In addition to the obvious benefits of having a banker such as saving time or getting proven professional advice, we found that in a family business situation, having an outside objective voice helped with the inevitable differences in opinion that comes up between family members or partners. We didn’t have any serious conflict, but there were some differences that wouldn’t have been as easily fleshed out without the help from an outside party. It was nice to have a neutral third party to bounce ideas off of and help steer us in the right direction that would maximize benefits for all. Since the most important thing to us was maintain good feelings within the family, it helped to have a banker who had experience helping parties with potentially difficult internal conversations.
We had been working with local counsel on a variety of issues, and had assumed that they would serve as our attorneys in any transaction. The bankers persuaded us that we should hire outside counsel for the deal. This ended up being one of the best decisions we made. First, we had no idea the complexities that would come up from a tax and structuring perspective, and it was good to have confidence in the specialized advice we received. Second, the banker and lawyer ended up being sort of a dual strike force in the deal, and it was important that they had worked as a team previously.
Life After the Deal
It is always difficult to see your baby grow up and move on beyond you – but after a transition in ownership, it can still be both positive and healthy for everyone. There is of course a honeymoon period after a close where employees are still trying to feel out the culture of the new owners and see what changes will take place. I have found great pleasure in continuing to associate with many of our employees and try to go to lunch with someone from the company at least once every few weeks. It helps keep our family informed about the company and it also shows the employees that we didn’t just take our money and run. They were our extended family while we were in the business and we still consider them family after we transitioned out.