Posts Tagged transition
Probate/Trust A Timely Business Transition or Transfer
Posted by Packard Acquisition Research in Family business on August 3, 2010
My close call came when a dying entrepreneur wanted to transition his business to his drug using oldest son. His heart was in the right place, but the business decision would have been fatal to the company.
The key employees quickly stepped forward to tell the owner that it would be the end of their employment if this happened.
The son’s behaviors had been onerous – there was no other way to keep the business in the family. It sold quickly, to the benefit of all involved (especially the oldest son).
When a family business suffers the loss of its key entrepreneur, change will happen quickly. If succession planning was done wisely and well the transition can go smoothly and risk is greatly reduced.
Too often, death or disability of the owner is unplanned and human nature and the harsh reality of commerce throw a business into chaos as family members disagree over the critical decisions that must be made for the company to survive.
Success lies in guiding your family business clients to see the importance of timeliness and best practices. Even the best businesses can’t avoid the injury of severe management dysfunction as siblings battle over management and money. Failure is hard to avoid when emotions and disagreement steer a business in the wrong direction.
We counsel our clients to work with a professional family business consultant (yes, they do exist) and recommend a book that advises wise business transition, by Cary Tutelman;
The Balance Point: New ways business owners can use boards (Famille Press, 2008). http://www.famillepress.com/
For those businesses that need to be sold, we recommend time specific marketing, which is an industry specific approach to transferring a business at a fair price in a rapid manner (we offer as part of our profiling and research service).
Timing is important to a business that has lost the glue of its entrepreneur. Having someone on hand to guide the business into the next generation or transfer will greatly lower the risk of failure.
Comment here with your stories of how business transition/transfer have been executed well or poorly.
Your experiences can help others from learning the hard way.
Value Insights
Posted by Packard Acquisition Research in Acquisitions, Business valuation, business finance, Mike Tikkanen, Packard Acquisition, Risk on January 25, 2009
What We Know That Just 
Ain’t So, or
Value Insights
Unanticipated mundane external factors are most often responsible for dumping our transactions into the 80% that don’t add value category.
Carefully developed evaluation and due diligence models offer the best chance of uncovering the questions that if answered properly, will cause us to avoid the failures that affect the great majority of acquiring companies.
To have great evaluation and due diligence models without a strong team that can recognize, develop, and work with the tools will drop you short of your goals also.
The assumptions made in the board room about the talents, team members, roles, responsibilities, systems, and procedures, determines the accuracy of the search and the effectiveness of the due diligence.
A smart team with the right resources can execute the complex task of acquisition at a far lower risk factor than a half smart team with almost the right resources. The losses can be staggering. The investments in team and resources are quite modest in comparison.
Brought to you by; www.packardacquisitions.com
Key Man Insurance
Posted by Packard Acquisition Research in Acquisitions, Business models, Mergers, Mike Tikkanen, Risk on January 24, 2009
The deal was almost done. The owner was asked if he has prepared his key man for the transaction. Specifically, he was asked if he had promised the key man a bonus for sticking around for 12 months to make sure that the new corporate owners would transition well into the client base and management team.
This was a rich deal for the owner. The owner assured us that he had generously compensated his key man.
Days before the transaction was to close the key man quit and moved across the street to another plating company. The owner had thought our concerns overblown and had in fact done nothing to incentivize his key man.
This deal fell out of bed with a non retrievable thump.
Tightness of wallet cost this seller millions of dollars (and nearly a heart attack) when his deal collapsed when the key man left.
In trying to patch up the transaction and talking with the key man, I discovered that he would have been happy with a small amount of money and a little more title but he was felt damaged by being treated like part of the woodwork. Due diligence is more than validating the numbers.
