Family Business Director

Corporate Finance & Planning Insights for Multi-Generational Family Businesses

Category

Shareholder Liquidity


Shareholder Engagement

Is Redemption a Four-Letter Word?

As recently noted in the Wall Street Journal, large public companies are announcing share repurchase programs at a record pace.  Like many issues, what is straightforward for public companies becomes a bit more complicated for family businesses.  Two factors in particular increase the degree of difficulty for family businesses.  First, the motivation for redemptions can be complicated by personal relationships.  Second, price is not a given as it is for public companies. We discuss both of these in this week’s post.

The Family Business Director To-Do List

Share Redemption / Liquidity Programs

In last week’s post, we explored how family businesses can use periodic share redemptions or ongoing liquidity programs to promote shareholder engagement and satisfaction.  This week’s to-do list includes important tasks for family business directors to complete whether planning for a one-time share redemption or establishing a family shareholder liquidity program.

Who’s In and Who’s Out?

There are many reasons family members may want to sell shares: desire for diversification, major life changes, funding for estate tax payments, starting a new business, or funding other major expenditures. What is the best way to provide liquidity to family shareholders on fair terms without sparking a run on the bank?

Shareholder Redemptions in Family Businesses

Are They Good or Bad?

Over the weekend, the New York Times published an opinion column by Chuck Schumer and Bernie Sanders in which the senators decried the increasing prevalence of stock buybacks among the country’s largest publicly traded companies. Reading the column made us think about shareholder redemptions for family businesses. Do shareholder redemptions hurt or help family businesses?  Of course, that question does not have a simple answer.  Not all shareholder redemptions are created equal, so in this post, we’ll outline three possible redemption scenarios and identify what attributes suggest whether a given shareholder redemption will help or hurt a family business and its relevant stakeholders.

Consulting Services

Family Business Advisory Services

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