Article written by:
Casey Grisez
  Manager, Valuation & Business Advisory Services

As Baby Boomers retire in large numbers, many small- and medium-sized businesses face ownership transitions. Options can include strategic sales, management buyouts, and employee ownership through sale to an ESOP.

Another option is to transition to family members. This option can be complicated, as family issues and business matters do not always mix well. Imagine having to negotiate a required level of working capital with a sibling who used to give you noogies (not that my older brothers ever did that).

Dealing with family issues in our business valuation projects reminds me of the HBO series Succession. Succession profiles the Roy family as the patriarch, Logan Roy, begins to step back from the multi-billion dollar media and entertainment conglomerate he controls. The central theme is the struggle for power between Logan’s children, Kendall, Siobhan, and Roman.

While most businesses we work with are different than the (fictional) multi-billion dollar, multinational media conglomerate Waystar Royco, a few best practices have emerged when mixing family and business:

—  Transparency:  In any business transition, all facts will eventually come to light. Valuators and opposing parties will recognize attempts to rationalize poor performance, misrepresent customer relationships, or influence other aspects of a valuation. Issues that may never arise in a negotiation with a third party can occur in the context of longstanding personal relationships. Resist the urge to take steps you would not take with an unrelated third party, and be aware when personal feelings affect professional judgment.

—  Communication:  Between emails, phone calls, data rooms, and chat applications, communication options abound these days. While it can be tempting to plead your case in smaller groups to influence value beneficially, representatives should ensure that pertinent information is shared appropriately. Communication best practices are to include all relevant parties in information-sharing emails, meetings, and conference calls.

—  Perspective:  It can be easy for personal issues to affect professional judgment, and it is vital to maintain perspective. Whether buying or selling a business, consolidating ownership of disparate entities, or settling an estate, keeping the end goal in mind is crucial in forging through the inevitable complications in the succession and valuation process.

While your family is unlikely to face the same issues as the Roy family, keeping a few best practices in mind can help maintain peace in business and family. We have experience handling complex family business valuations and succession plans, so please reach out if you need help navigating a challenging situation.


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