The Convenience of Family Business

The Convenience of Family Business

There are pages of literature dedicated to Mergers and Acquisitions (M&A) and the proper due diligence around the transfer of a business or a trade to a new owner. Step by step guides to the “Do’s and Don’ts” of completing a transaction and 100 page checklists. But how do you navigate the scenario where the Vendor, who has built up his company with his own brother for 20 years and over the past five years they have successfully onboarded the next generation of the family, and now want to pass the baton on to that next generation. And did I mention that his own brother wants to stay on!

Having worked with family run businesses for over 20 years, I have found that most of the “Do’s and Don’ts” and checklists above are of course relevant but there are added sensitivities and other family considerations.  I have just successfully completed the transition of a group of convenience stores from one generation to the next and the key considerations I found were as follows:

• Fair Value
• Respect for Vendor and Acquirer
• Understanding who your wider team are
• Communication
• Patience

Fair Value
Ensuring that both parties are getting fair value is the first key consideration. Usually, and in this case, the market will decide. Having already performed my own valuation using the traditional methods, to get the fairest value we put the business to the market and received separate and multiple offers from the two largest convenience store Multiples. The large Multiples, know their market and how to value stores and as their valuations were consistent with my own valuation we had a fair value to work with. Box ticked!

Respect for Vendor and Acquirer
As I had worked with the family for the past number of years I had built up strong trusted relationships with the original generation and the incoming generation, and both wanted me to be involved and on their side. Most M&A literature would suggest that this is a “DON’T”. We didn’t see it that way. Respecting both their wishes and remaining neutral through out the process but also respecting and understanding the deliverables for both sides was key. Trust your instinct in these scenarios, have an open dialogue with both parties and set parameters at the outset so that there are No Surprises. And always, ALWAYS, be firm and use your professional judgement to tell both parties “AS IT IS.”

Understanding who your wider team are
Your wider team are all members of all teams that are going to ultimately make the decision here. Like any team, your team is only as strong as the slowest or weakest component.

That team includes and the list is not exhaustive:

• Vendors tax advisors
• Acquirer tax advisors
• Vendors Legal
• Acquirer Legal
• Banks Legal
• Multiple’s representatives (In this case)
• Your own in-house team

Apart from the last one, you have no direct control over the other team members, but you can choose to make it easier for all by keeping everyone moving in the right direction.

Communication
The only way to ensure that all members of the wider team are moving in the right direction in a timely manner is through constant, consistent, scheduled all-member meetings and team calls. Ensure you have an agenda , action points and agreed take-away’s from every meeting. Try to remember that everyone is working towards the same outcome. Sometimes, as I discovered, team members my need to be reminded of that. But everyone has a role to play and each have to do that correctly. It is important to get each step right. Have a detailed step plan and ensure everyone is doing their part.

Patience
As Axl Rose once sang, “All we need is just a little patience”. This is a hugely powerful tool when working with extended team members. Patience is not just the ability to wait, but to have a good attitude when waiting for something to get completed. Remembering and understanding that each member of the team above have their role to play, and in some instances quite technical roles to play. Therefore always understand that there can be a delay, a further question to be answered, another document to be signed.

Always be patient, don’t overpromise and under deliver, try under promise and over deliver.

Author: Noel Delaney, Founder of ND Audit and Advisory