And, because family enterprises are focused on many of the same issues as other types of businesses, they have to operate against a backdrop of intensifying pressures, including:
If that weren’t enough, family businesses also have to face the fact that the conditions they enjoyed before the recession are long gone and unlikely to return. Add to that the effects of globalization, changing demographics and the digital revolution, and it’s easy to see why the old business as usual approach is no longer enough.
Family businesses will now have to adapt faster, innovate earlier, and become more professional in the way they run their operations. In other words, they need to become more professional, which covers everything from basic systems and processes in areas like finance and HR, to risk management and corporate governance. Those that succeed will be the ones who anticipate change and get out in front of it or, better yet, change themselves.
We had a long-term relationship with a family business in the industrial manufacturing sector. The first generation owner wanted our help in transferring ownership of the company to his four children: two were passive owners; two were active. He also wanted help with the tax structuring of the business, including moving the company from a C Corp to an S Corp structure. For the next two decades the second generation ran the company.
However, they decided that they wanted to sell the business. The company business was historically cyclical, which generated a level of earnings volatility. As part of our sell-side due diligence support process, we helped management prepare a thorough normalized analysis of their business performance allowing them to demonstrate their ability to operate strongly even given the pressures in the commodity side of the business. The analysis also reinforced what established their regional leadership and created a valuable franchise.
Guidance every step of the way
The company also wanted to take care of their management and employee stakeholders when the business was sold. We represented the seller in the negotiations with the buyer, providing them guidance during the due diligence process such as with managing transaction risks and exposures. Our tax teams provided advice on tax considerations in structuring the transaction to optimize post deal after tax cash flows to the shareholders.
Preparation yields results
We were able to advise the company on issues identified in advance of an offer which better positioned the company and its shareholders to achieve the desired asking price and minimize due diligence concerns. Finally, we provided valuable advice on structuring and negotiating the sale. The company was ultimately sold at their desired sale price.
A family owned business in the consumer products sector wanted to grow internationally through a strategic partnership or acquisition.
Finding the right business partner
We looked for potential candidates and built a list of potential domestic companies with international operations. A company was finally chosen and the transaction was structured with two elements: An acquisition and a joint venture. We helped organize the process, which included:
Two teams, one mission
To best serve the company, we created two teams seamlessly linked to each other: One domestic, the other based in Latin America. Finally, we supported our client throughout the negotiations and due diligence, which led to the successful closing of the transaction.