Family Business Director

Corporate Finance & Planning Insights for Multi-Generational Family Businesses

Capital Budgeting

What Time Is it for Your Family Business?

It is harvest time in rural America.  Farmers are working long hours gathering the crops that have been planted, fertilized, watered and worried over since springtime.  While the cycle of planting and harvesting is an annual one on the farm, for family businesses, the cycle can span decades or even generations. There are many different ways to classify family businesses, but one simple distinction that we find ourselves coming back to often is that between planters and harvesters. So what time is it for your family business?  Is it planting season or harvesting season? 

Capital Structure Planning & Strategy

Managing the Family Business in an Era of Cheap Capital

For public companies, today’s almost endless supply of cheap capital (as evidenced by the proliferation of special purpose acquisition companies, or SPACs) is a boon. The low cost of capital makes it easier to justify investment opportunities financially, and investors are willing to provide capital in search of higher returns. For many family businesses, however, the era of cheap capital may not be an unqualified good.

Planning & Strategy

Is There a Ticking Time Bomb Lurking in Your Family Business?

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.

Excerpted from our recent book, The 12 Questions That Keep Family Business Directors Awake at Night, we address this week the question, “Is there a ticking time bomb lurking in your family business?”

Planning & Strategy Shareholder Engagement

How to Communicate Risk to Family Shareholders

Communicating risk effectively is a challenge for all companies.  Making too much of the risk can alienate customers and erode the credibility that might be critical when a threat actually materializes.  On the other hand, insufficient risk disclosure can result in liability that threatens the company’s existence.  A recent article in the Harvard Business Review addressed this challenge in customer communications.  The authors of “The Art of Communicating Risk” offer three suggestions for communicating risk to customers more effectively.  In this post, we will review those suggestions, and think about how they might apply to communicating risk to family shareholders.

Capital Structure

The Evolving Landscape for Family Capital

Two Developments That Will Affect Family Businesses

The rise of the family office as a source of investment capital for other businesses is the best evidence that families are comfortable looking outside the family business to generate returns on family capital. Just as liquid naturally flows to the lowest point, capital naturally flows to its highest and best use. The viscosity of family capital is high, so it may take longer to move, but it eventually will. In the context of this broader trend, we propose three things for family business directors to begin thinking about.

Valuation

Why Your Family Business Has More Than One Value

It is understandably frustrating for family business directors when the simple question – what is our family business worth? – elicits a complicated answer.  While we would certainly prefer to give a simple answer, the reality a valuation is attempting to describe is not simple.

The answer depends on why the question is being asked.  We know that sounds suspect, but in this post, we will demonstrate why it’s not.  Let’s consider three potential scenarios that require three different answers.

Planning & Strategy

Acquisition Strategies for Family Businesses

Casting a Wider Net May Reveal Attractive Opportunities in the Downturn

As we noted in last week’s post, directors should take this economic opportunity to think more broadly about the portfolio of assets owned by their family business. Are any pieces extraneous? Are there any pieces that are missing? For family businesses that have hesitated to make acquisitions in the past, the missing pieces do not have to be big, nor do they have to be existing competitors. In this week’s post, we offer five categories of targets we think would be helpful to expand your list of potential acquisition opportunities.

Consulting Services

Family Business Advisory Services

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