Family Business Director

Corporate Finance & Planning Insights for Multi-Generational Family Businesses

Category

Capital Allocation


Capital Structure Dividend Policy

A Guide to Corporate Finance Fundamentals

Part 2 | Finance Basics: Capital Structure

This post is the second of four installments from our Corporate Finance in 30 Minutes whitepaper. In this series of posts, we walk through the three key decisions of capital structure, capital budgeting, and dividend policy to assist family business directors and shareholders without a finance background to make relevant and meaningful contributions to the most consequential financial decisions all companies must make. This week, we focus on capital structure.

Is Your Family’s Capital “Lazy?”

What We’ve Been Reading

At a recent meeting with longstanding family business clients, management mentioned that one of their independent directors had introduced the term “lazy capital” into the family’s vocabulary.  We had never heard that term before, but it perfectly encapsulates something we see at too many family businesses: an undisciplined capital allocation process that tolerates sustained underperformance.  We ran across a couple articles this week that, while written with public companies in mind, made us think about the perils of “lazy” family capital.

FAQ

Determining the Right Hurdle Rate

How Good is Good Enough?

If family business directors are going to make good capital allocation decisions, they need to know what the right hurdle rate is.  If the hurdle rate is set too low, the family may experience weak future returns.  Setting the hurdle rate too high, however, introduces the risk that the family business will pass on attractive investment opportunities.  In this post, we consider how the hurdle rate relates to the weighted average cost of capital.

Capital Structure Dividend Policy M&A Shareholder Engagement Sustainability Taxes

What Keeps Family Business Directors Awake at Night?

Stewarding a multi-generation family business is a privilege that comes with certain responsibilities, and each family business faces a unique set of challenges at any given time.  For some, shareholder engagement is not currently an issue, but establishing a workable management accountability program is.  For others, dividend policy is easy, while next gen development weighs heavily. Through our family business advisory services practice, we work with successful families facing issues like these every day.

Consulting Services

Family Business Advisory Services

Mercer Capital provides financial education services and other strategic financial consulting to family businesses