Corporate Finance & Planning Insights for Multi-Generational Family Businesses
Family businesses are either growing or shrinking. Since shrinking is not an attractive option, we explore the three primary avenues of growth for family businesses in this week’s post, posing some key questions for your directors and managers to consider as they formulate growth strategies.
The business landscape of 2022 was like a competitive football game, where the repercussions of inflation, rising interest rates, and global conflicts felt like a stonewall defense. Still, businesses found ways to hold their ground, providing key takeaways for family businesses, as dissected in our comprehensive 2023 Benchmarking Guide. Our guide helps family business directors understand how to make important financial decisions, like setting dividend policies, making investments, and arranging financing, while analyzing the shifts in capital allocation amid the changing financial climate.
In this week’s post, we analyze the recent Tax Court case, Cecil v. Commissioner. A key issue in the case was the role of appreciated corporate assets in determining the fair market value of a minority interest in an operating company. The Cecil family has owned and operated the Biltmore mansion in Ashville, North Carolina for decades, and the case highlights the intersection of the asset-based, income, and market approaches to valuation, and serves as an important reminder to families evaluating their own estate plans in light of the approaching sunset provisions in the Tax Cut and Jobs Act of 2017.
Demystify the intricate process of business valuation in our short 5-minute video. Gain a deeper understanding of the key factors influencing your company’s value, including industry context, economic environment, and the role of control and marketability.
Warren Buffett is regarded as one of the world’s preeminent investors and most shrewd businessmen. Buffett and his partner, Charlie Munger recently drew thousands to Berkshire Hathaway’s annual meeting in Omaha. Buffett’s 2022 shareholder letter analyzes the company’s strategy, performance, and vision for the company going forward. This year’s letter provides several lessons for investors and family businesses alike.
In “The Psychology of Money,” Morgan Housel challenges the conventional view of financial decisions being purely data-driven. He emphasizes the role of luck, risk, and adaptability in financial outcomes. His lessons include the importance of recognizing risk and luck rather than skill, focusing on broader patterns rather than individual cases, and maintaining adaptability in long-term financial planning. This analysis provides a fresh perspective on managing family businesses and reshaping financial decision-making.
Bernard Arnault, founder of LVMH and the world’s wealthiest person, is meticulously planning the future of his luxury empire. Through a blend of creativity and pragmatism, Arnault has built LVMH into a global powerhouse while maintaining its status as a family business. Learn how the “Wolf in Cashmere” has prepared his children for leadership roles, and the Arnault family’s approach to long-term planning, stewardship, and collaboration.
Looking to unlock the secrets of corporate finance in just 5 minutes? This concise and engaging video will demystify the world of finance, providing you with an essential understanding of key concepts and strategies. Perfect for aspiring business leaders, entrepreneurs, or anyone looking to expand their knowledge, this video will give you the background you need to understand financial business decisions made by your company’s board and directors.
Mercer Capital sponsored and attended last week’s Transitions conference, where enterprising families came together to discuss the most critical topics for family business success. This year’s event revolved around the “3 New Circles” – engagement, succession, and governance – and tackled the essential questions family business leaders need to address. In addition, our breakout session, How to Be a Good Owner, presented 5 questions associated with developing good owners for your family business. How would you answer these questions?
A recent Barron’s article on the link between Elon Musk, corn, and John Deere piqued our interest. Enduring almost 200 years as a company compelled us to dig a little more. The present firm, Deere & Company (NYSE: DE), was incorporated in 1958. The company had five generations of Deere family leadership until the early 1980s when non-family members took the driver’s, or tractor’s, seat. The road from steel plows to $500,000+, 60,000-pound behemoths had its share of droughts and plentiful harvests. But what can family businesses take away from this American icon? We see two lessons: be open to seeking non-family members to run your business, and don’t be afraid to be a fast follower.
