Webinar: Family Business Transition Strategies That Turn Conflict into Opportunity

Join the Beringer Group for a lively discussion on how to transform conflicts into golden opportunities when transitioning a family business. Click HERE for a PDF file of the slides used during the webinar. Scroll below the media player for comments and questions generated from the discussion, or to add your own.

26 thoughts on “Webinar: Family Business Transition Strategies That Turn Conflict into Opportunity

    • This is not an easy problem to solve. The solution usually requires an outside third party to present the reality that “ Father Time is undefeated, and no plan is a plan.” Even if they won’t let go, the planning documents MUST be updated.

  • If you have voting and non-voting stock, are the non-voting shareholders likely to complain that they don’t have a say in the business? If so, how do you address this concern?

    • Proper compensation rules (i.e. a dividend policy) goes a long way to solving this. Sometimes a board seat also can help.

  • If ten members of the family own the company equally and one wants to sell their share, is there a way around NOT having a minority discount apply to the sale?

    • All transactions are willing buyer, willing seller negotiated. Partial buyouts without minority discounts can prove onerous to company; they can set an unfavorable precedent and potential estate tax issues for the buyers. That being said, there are creative ways to achieve exit.

    • A shareholder actually owns stock. A stakeholder has strong vested interest in the success of the company; this includes family members who don’t own stock, key employees, key customers, and key suppliers.

    • An ESOP is a qualified stock ownership plan similar to a profit sharing plan. The investment is primarily in company stock. It provides multiple opportunities for owners, executives and employees. Where it fits, it is a very powerful option that should always be vetted because of tax efficiency of the transition and the positive potential impact on the family, employees and community. Shareholders can and sell part or all of their shares over time to the employees in Trust.

  • A father owns the stock and wants to keep the company in the family. He has a 30 year son who is in the business, but very immature and lacks leadership skills and work ethic. How do you iron out this major conflict?

    • The father can work on an estate plan that begins to move equity but keeps control and income. You must engage on a training program, engage key management and determine if keep or sell is the right direction. In our experience, the son often matures and the succession plan can work. If it doesn’t, a sale to management or outside third party must be considered.

  • The father is over 65 and no longer has a tight handle on the company, but he wants to show outsiders that he does have an active role.

    • Our experience is father can have a very effective advisory role as Chairman of the Board.
      Like in a public company, he can introduce long term succession plan to management and other stakeholders and let the process evolve.

    • A family council or meeting to facilitate exit can blow up. We would normally prefer an outside third party to work with the founder first, then go to a family meeting.

  • You mentioned the split equity into voting and non-voting for the children based on their involvement; are there often issues for the children who work in the business to be “paying” their siblings for their work? How can this be explained to keep the calm in the family?

    • Our experience is that family members can work in the business. Compensation must be based on fair market value and supplemented by a dividend policy. Often a compensation committee of the board can help set guidelines. Active employees get payroll and bonus opportunities, non-actives get paid by dividends covered by a dividend policy. Paying non actives a salary is a precedent that can lead to conflict.

  • How do you approach expediting the development of family members becoming the CEO or president, when they are not ready yet?

    • In training family members, we feel that experience is the best teacher. They need to be involved in all strategic planning and learn the founder’s thought process. There are also numerous third party education programs as well as very successful coaching programs.

  • What is the average age and what is the recommended age of the founder to transition a business to the next generation? This is assuming that the next generation is available and qualified to take over.

    • There is no general answer. Today’s younger generation sometimes mature later, sometimes are ready very early. This is a process the founder must begin sooner rather than later.

  • In my company, my father is still alive. My brother in law and I simply will not get along. My father is not able to set everything in order. I feel when my father passes, we will be in a messy situation. Should I leave, or stick around?

    • Someone should try to work with your father now. If this is impossible, your current leverage probably results in economic harm. Without more facts, we would stick with the idea of breaking the company into two or selling it in the future.

  • Several years after the founder’s death, the siblings and their mother are not getting along at all. One child is estranged. One sibling wants to divide assets equally and other kids want to stay together. Other siblings won’t sell. How do you get nonspeaking family members together to try to work though business and relational issues?

    • This is a question that we really need more facts in order to answer. Perhaps an internal sale from those siblings who don’t want to keep the company, or a private equity partner, ESOP or bank financing could be explored.

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