Family Business Director

Corporate Finance & Planning Insights for Multi-Generational Family Businesses

Shareholder Engagement

Should You Conduct a Shareholder Survey?

Five Reasons Why It's a Good Idea

While private companies aren’t provided the constant, real-time feedback in terms of shareholder value afforded to public companies, ensuring that board, management, and shareholder incentives and preferences in privately held businesses are aligned is one step towards potentially maximizing shareholder value.  A shareholder survey can provide feedback to boards and management teams to avoid situations like the one Salesforce is currently facing, which finds itself amidst a potential shareholder-driven board takeover.  Since private company managers know precisely who their shareholders are, shouldn’t the characteristics and preferences of these shareholders be considered in the corporate decision-making process?  Absent these considerations, any attempts to “maximize shareholder value” are almost always destined to fail.  This week’s post outlines a few reasons why boards and management teams should consider a shareholder survey as part of their strategy to keep the incentives of all a company’s stakeholders aligned.   

Planning & Strategy

The 84 Lumber King

Succession Planning and How to Find Your Next Leader

84 Lumber is a family-owned private company. It operates more than 260 stores, component manufacturing plants, custom door shops, custom millwork shops, and engineered wood product centers in 35 states. Joseph A. Hardy III, the founder of 84 Lumber, lived an interesting and flamboyant life. The business is run now by Hardy’s youngest daughter, Maggie Hardy, who serves as president. A Wall Street Journal article on Mr. Hardy detailed his life and, given his recent death, also reminded us about the “next man (or woman) up” dilemma for many businesses. Who will ultimately take the reigns—especially following a larger-than-life founder?

Special Topics Taxes

Estate Tax Exemption Uncertainty

And Other Takeaways from the Heckerling Estate Planning Conference

We had the opportunity to attend the 57th Annual Heckerling Institute on Estate Planning, one the largest conferences for estate planning professionals. This year’s week-long conference was the first to be held in person in a few years, and the exhibit hall and education sessions were full of good information and details on the estate, gift, and tax planning fronts. We share just a few topics of conversation and tidbits we picked up from the sessions and conference last week.

Dividend Policy Shareholder Liquidity

Dividends, Shareholder Signals & Present Value

As market and financial data for 2022 continue to roll in, we are beginning to prepare for our annual benchmarking study. One early finding is that investors clearly distinguished between companies that pay dividends and those that don’t.  Across the size spectrum, investors favored dividend-paying stocks in 2022. While it was a down year across the board, the average return for companies that paid dividends was less negative than those that did not.  In this post, we explore two potential reasons for this outcome and the lessons for family business directors.

Capital Structure Planning & Strategy

Southwest Airlines Meltdown and Your Investment Decision

Come Fly With Me (Soon?)

Last week, Southwest Airlines experienced significant disruptions and canceled thousands of flights following a winter blast smacking a large swath of the country. Underinvestment in system-critical operations was a key culprit, and it reminded me of the “Invest or Not to Invest” decision that faces family businesses. What investment decisions could Southwest have made before the crisis? And, what about your business? How do you make rational investment and capital expenditure decisions? Do you acquire a new business or modernize? What is a good investment?

In this post, we discuss two key areas to address these questions: how to identify investments available to your business and how to evaluate your available investment opportunities.

And, if you traveled during the storm, we hope you made it to your destination and home.

Performance Measurement Planning & Strategy

What Is on Your Family Business Box Score?

A question for you and your board, what is on your family business box score? When the lights are still on and things are stable, it can be easy to continue with business as usual and not look too closely at key return metrics. Creating a box score, and maybe more importantly, updating it consistently, can help prevent complacency.  Establishing fundamental metrics important to your business and benchmarking your performance to peers or ‘opponents’ can help quickly convey how the family business is doing to you and your shareholders. In this week’s post, we consider three metrics for your family business box score.

Planning & Strategy Special Topics

Is Your Family Business Ready for the Next Recession?

A Look Ahead to 2023

As we begin to put a bow on 2022 and turn our attention to 2023, we suspect that the dreaded “R word” is on the mind of many of our readers as they contemplate the myriad challenges and obstacles their businesses will face in 2023. As a family business owner or director, now is the time to think critically about how your family business is positioned for a potential economic slowdown.  This post offers a few practical steps family business owners and directors can take to ensure their business continues to thrive even if Santa brings us a recession this year.

Capital Structure Valuation

All in the Family Limited Partnership

Many enterprising families have January 1, 2026, circled on their calendars. Why? Because the individual estate tax exemption reverts to $6 million (give or take, depending on inflation) in 2026 from its current level of $12 million.  As a result, many estates that are not currently large enough to be taxable will become so, and the effective tax rate for all estates will increase. Has your family considered a Family Limited Partnership? The “magic” of the FLP is the ability to transfer assets to heirs, and out of taxable estates, at discounted values. The IRS is skeptical of many FLP planning strategies, noting that audit challenges may become more frequent as the IRS puts its new $80 billion enforcement budget to work. While the valuation discounts applicable to FLPs may seem like estate planning magic, there really is no sleight-of-hand involved.  Instead, valuation discounts reflect economic reality. We talk more about this in this week’s post.

Dividend Policy Planning & Strategy Shareholder Engagement

Double Down or Cash Out: The Reinvestment or Distribution Decision

I recently got back from the AICPA’s Forensic and Valuation Services conference in Las Vegas.  While I came back richer in experience and CPE credit, the green felt of the blackjack table was less kind to my wallet. Matching your family shareholders’ growth objectives with their relative risk tolerance is a key directive for family business directors and one that is tied directly to what your family business means to you.  We highlight two corollary questions relating to growth, risk, and business meaning: investing decisions and distribution policy.

Consulting Services

Family Business Advisory Services

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