Acquiring a family run business
So your company is considering an acquisition, but this potential company is family run, which can create some complications. When is the best time to put in your offer? Do you keep family staff on board? Is it better to use jargon or avoid it?
Frank Williamson, Managing Partner at FourBridges Capital Partners offers 7 tips for acquiring a family run business, in his own words below, to help you navigate these often difficult (yet rewarding) waters:
1. Timing is everything.
Prospective investors don’t want to spook a smaller, family-run business with an out-of-the-blue offer. Consider how to best time your bid. For example, the fourth quarter may be a good time to call, when business owners are looking at year-end numbers and planning ahead for the new year.
There are also times when it’s best to hold off: when a younger generation has just assumed the reins of the business, they’re likely more focused on running the company than selling it.
2. Learn about the company’s succession plans.
Did a new family member recently take over? Is the president or CEO reaching retirement age? Understanding a business’s succession plans will help you approach management during an opportune time, when it may make sense for them to consider a merger or acquisition.
3. Acknowledge the company culture.
Family businesses have unique structures and complex histories that tend to dictate company culture. Learn these details and address any potential concerns the company may have about an outside buyer.
4. Speak their language.
Smaller operations, although successful, may not be familiar with or impressed by top-level financial structures and technical language. Understanding how the company communicates internally can help you to clearly and effectively present information during deal negotiations.
5. Be an ally.
Show the owners how a merger can help them reach personal, financial and corporate goals. If they prefer to remain involved in the company, consider structuring a deal that will allow them to do so, and talk through their options so that you understand whether they want to be part of the day-to-day operations, or they want to play a more hands-off role.
6. Spell out the financial possibilities.
Convey different options for a cash buyout, stock options or additional payments based on specific performance metrics. Creating a discussion about different scenarios, rather than a straight acquisition, may help the owner open up to a purchase.
7. Highlight future opportunities for their employees.
Often, owners of family-run businesses are concerned about the future of the people who work for them; it’s common for staff and personnel to include family members and friends who have been with the company for years. If possible, work with the owners to find opportunities for existing employees who are highly valued, particularly family members and those who are seen as “part of the family.”