Page 21 from: April 2012

21April 2012

beast, especially when multiple layers of a fam-

ily have become involved.

One recommendation is that companies draw up

a family ‘constitution’ or agreement. Such an

approach is perhaps most useful for family enter-

prises layered in complexity and may appear

excessive for businesses in which, say, only a father

and son are involved, and in which the unwritten

but accepted intention is that the latter will take

over from the former at some future point. But

even in this latter case, problems can be avoided

down the line by committing such intentions to

print, especially when unforeseen circumstances

– such as illness or accident – intervene.

Need for flexibility
Specialist UK-based consulting and training

organisation Family Business Solutions (FBS)

explains: ‘An increasing number of families –

those who like to plan for their future rather

than leave matters to chance – are supplement-

ing their unwritten constitution (“how we do

things around here”) with a bit more formality

and organisation. The process of creating the

constitution, as well as the final result, helps the

family to reach important decisions, sometimes

on sensitive issues, which, if left unresolved, can

too easily result in conflict.’ The constitution

should be a ‘very flexible’ document that can

be used ‘to record the overall governance of a

complex family enterprise’, representing the

combination of assumptions, understandings

and expectations that exist in every family,

explains FBS. It should clarify, for example, who

can own part of the family enterprise, and the

roles and responsibilities of those owners.

‘Very different’
George Stevenson, an FBS consultant and the

founder several years ago of the Scottish Fam-

ily Business Association, reiterates that an

entrepreneur controlling all aspects of his or

her business means ‘short and direct lines of

communication’. But as soon as the business

makes the transition to, for example, ‘a sibling

partnership’, the issues become ‘very different’,

he insists. A common problem, he says, is that

sons and daughters expect to be allowed to

make their own decisions about the ‘family’

business with no recourse to anyone else.

In this new environment, the decision-making

process ‘needs structuring’, underlines Mr Ste-

venson. ‘They need to learn how to communi-

cate and make decisions. Ownership and man-

agement are separate; they have to plan to keep

them separate. This is what we (at FBS) spend

most of our time on.’ The overlap period when

the ‘controlling owner’ is joined in the business

by the next generation ‘can be hugely stressful to

cope with’, he also emphasises, adding that plans

should be laid down within companies ‘for when

the controlling owner is no longer there’.

Asked whether family business owners in tra-

ditional industries are reluctant to take on out-

side, specialist help in order to tackle these

issues, he acknowledges: ‘Yes. That can often be

the initial reaction.’

Involved and considered
A recently-released publication entitled ‘The

Family Constitution’, put together in the USA by

the Family Business Consulting Group in concert

with Palgrave Macmillan, argues that ‘the process

of developing a family agreement of this type is

more important than its contents’ because, for

example, it allows different family members to

participate and contribute, thereby enhancing

feelings of being involved and considered.

The publication also emphasises the valuable

function that advisors can perform in devising

an agreement as they are ‘outsiders and able to

look at family firm issues from a detached per-

spective and act objectively’. Most frequently, it

adds, they act as facilitators and as experts on

all relevant subjects, such as family business,

business law, tax and strategic management.

One of the publication’s main messages tallies

with that delivered by most other experts in this

field: when it comes to plotting the future

course of a family business, the planning stage

can never begin too early.

Selling a family-owned
business – 10 tips

Björn Voigt, former Managing Director of
German scrap giant TSR Recycling and now
Managing Partner in Germany-based S&P
Mergers and Acquisitions, offers his personal
top 10 tips when it comes to selling the business
or passing it on to the next generation.
He says: ‘If the decision is taken to sell the busi-
ness, the owner/entrepreneur must always
proceed systematically and with determination.
Procedure and timing are very important when
selling a company.’

1 Make a critical check of the strengths and
weaknesses of your business.

2 Carefully check your personal situation:
age; health; fi nancial risk provisions; and
successor and co-shareholder status.

3 Create a precise picture of the scope and
freedom of action enjoyed by your company
product-wise, technically, fi nancially and
from the perspective of your age and health.

4 Think of companies in your own country or
from abroad which could be considered
potential buyers.

5 Determine the possible effects of synergy
through a partnership with another company.

6 Think of the price that you would like to
realise, but also the price you probably could
realistically achieve through a transaction.

7 Think of how you can reinvest the realised
sum.

8 Once this is done, balance the results of your
investigations and decide on the
best course for your company, ie
full sale, sale of only part of the
business, management buy-in or
management buy-out.

9 Bring in an experienced (and
international) M & A expert
to help you in your decision-
making processes as well as in
initiating and conducting the
optimal transaction.

10 Do not wait for something to hap-
pen – work towards the sale of
the company in a direct and sys-
tematic way.’

A family affair

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