Corporate Finance & Planning Insights for Multi-Generational Family Businesses
Fed Chair Jerome Powell addressed the National Association of Business Economists conference in Nashville last week, and we — despite not being trained economists — were on hand. In this week’s post, we provide a brief summary of our impressions and a few thoughts for family business directors.
Communication determines the success of any relationship, and the relationships among shareholders of multi-generation family businesses are no exception. As the business and family grow, shareholder relationships become more complicated, and formal communication becomes more important. While families nearing a generational transfer have some very specific challenges, effective communication is essential regardless of where the family business is in the corporate life cycle.
With the release of Chris Mercer’s new book, we’ve got buy-sell agreements top of mind, and you should, too. Buy-sell agreements don’t matter until they do. When written well and understood by all the parties, buy-sell agreements can minimize headaches when a family business hits one of life’s inevitable potholes. But far too many are written poorly and/or misunderstood. Directors are always eager to discuss best practices for buy-sell agreements. In this week’s post we revisit a blog where we talk to Chris and ask, “Is there a ticking time bomb lurking in your family business?”
We are excited to share the release of Z. Christopher Mercer’s latest book, Buy-Sell Agreements: Valuation Handbook for Attorneys published by the American Bar Association. This week, we share an excerpt from the book and what you can expect to find in the full copy.
Since 2017, the Nordstrom family has made multiple attempts to take the company private but has been rebuffed by the board. Nordstrom was in the news again this week, with the company disclosing that the members of the Nordstrom family were once again offering to take the company private, this time $23 per share (compared to $50 share six years ago). The Nordstrom board has formed an independent committee to evaluate the offer. In this week’s post, we identify three lessons for family business directors from the unfolding saga.
The current economic state is driving operating costs higher for many businesses and eating into profits. Employers are combating this by reevaluating their hiring strategies, which include resetting labor costs and reducing starting salaries. Margin analysis can be a beneficial tool for evaluating performance, and becoming familiar with the typical margins of your family business will provide a touchpoint for identifying opportunities to preserve and grow profits for your family business. Since ‘typical’ margins vary from industry to industry, being able to benchmark to similar companies can give family businesses a better idea of where they stack up.
We’ve recently observed private equity investors learning a lesson about liquidity risk, which family shareholders have always known. A couple of weeks ago, the Wall Street Journal noted that — amid a sluggish M&A market — PE-backed companies were increasingly turning to lenders to fund so-called dividend recapitalizations in a bid to provide liquidity to impatient investors. This week, we explore a PE strategy that might be worth considering for some family businesses: divided recapitalization.
Coming off a run of economic data releases in the last few weeks, we take a look at the numbers and some of their implications for the broader economy in this week’s post. GDP growth in the U.S. economy measured 2.8% in the second quarter of 2024, outpacing growth of 1.4% in the first quarter. Following persistently elevated measures in the first quarter, recent inflation readings have cooled. The following sections provide a brief look at these economic trends and their implications, sourced from Mercer Capital’s National Economic Review.
Our Family Business Advisory team put together a powerpoint deck, “Case Study: Kellogg Company – Attempting to Unlock Shareholder Wealth in a Mature Business” which tracks key events in Kellogg’s history and comments on the transaction. There are lessons family business owners can learn from the transaction and from Kellogg’s recent moves.
Volatile times are never easy to navigate, but there are strategies family business directors can employ to keep their business on course. As the heat waves, hurricanes, and a potential recession loom, we wanted to take a step back and highlight three strategies family business directors can adhere to in these uncertain times.
