Family Business Director

August 15, 2022 Planning & Strategy Shareholder Engagement

Stock Buybacks and Family Businesses

Stock buybacks were in the news last week as the newly-passed Inflation Reduction Act includes a provision levying a 1% excise tax on share repurchases by public companies. As we’ve noted in previous posts, we question Congress’s grasp of the basic economics of a stock buyback, but Congress is not our focus today. 

Privately held family businesses are exempt from the tax, but directors need to understand the real economics of stock buybacks (or, in the case of family businesses, shareholder redemptions).

August 8, 2022 Planning & Strategy

These Loafers Are Made for Walkin’

Italian Shoemaker, Tod's, Opts Out of the Public Markets

Last week, Tod’s – the Italian maker of luxury shoes – announced plans by the founding Della Valle family to take the company private. We discuss the motive behind this transaction and two obligations of all family businesses (public or not) that we believe this transaction highlights.

August 1, 2022 Planning & Strategy Shareholder Engagement Special Topics

How to Have “The Talk” With Your Family Directors

In this post, we discuss three simple rules that can help promote impactful and productive dialogue between parents, children, and different generations in your family business: big picture first, be transparent, and remember priorities. Having these transitional and educational conversations is essential for family businesses.

July 25, 2022 Special Topics

2022 Benchmarking Guide for Family Business Directors

Making Sense of 2021

Benchmarking is a powerful tool for family businesses.  Done well, benchmarking provides managers and directors with valuable insight and context for evaluating the operating performance of the family business and the strategic investing and financing decisions made by their leaders. 

This blog post will summarize some of the findings in our 2022 Benchmarking Guide for Family Business Directors. 

July 18, 2022 Special Topics Valuation

Only 2% of Small Businesses Know This Key Fact

Do you know how much cash is on your family business balance sheet? How about receivable health and your debt position? Reading this blog, you likely answered “yes” to these questions.

Do you also know how much your family business is worth?

If you answered “Yes,” you are in a select company as 98% of small businesses polled by M&T Bank over the past two years didn’t know the value of their businesses. Knowing and understanding the value of your family business is essential to making critical decisions around dividends, capital structure, or capital budgeting that have long-term effects on your family business.

Travis Harms, who leads Mercer Capital’s Family Business Advisory Services Group, spoke to CNBC recently on the importance of valuation and understanding the value of your business. This week’s Family Business Director post highlights the piece, and we hope you check it out.

June 27, 2022 Planning & Strategy

Is Your Family Business Worthy of Its Name?

Unlike McDonald’s franchisees, directors and managers of family businesses are not required to undergo a renewal procedure to maintain access to the family’s human and financial resources. However, pretending that you had to is a good exercise for managers and directors. What evidence do you have to support your decision to continue managing the family’s wealth? Do you have a regular reporting procedure in place that takes those elements into account? In this week’s blog post, we provide some broad elements that should be considered for any stewardship reporting model.

June 20, 2022 Special Topics

The Importance of a Quality of Earnings Study

Acquirers of companies can learn a valuable lesson from the same approach that pro sports teams take in evaluating players. Prior to draft night, teams have events called combines where they put prospective players through tests to more accurately assess their potential. In this scenario, the team is akin to the acquirer or investor and the player is the seller. While a player may have strong statistics in college, this may not translate to their future performance at the next level. So it’s important for the team to dig deeper and analyze thoroughly to reduce the potential for a draft bust and increase the potential for drafting a future all-star.

A similar process should take place when acquirers examine acquisition targets. Historical financial statements may provide little insight into the future growth and earnings potential for the underlying company. One way that acquirers can better assess potential targets is through a process similar to a sports combine called a Quality of Earnings Study (QoE).

June 13, 2022 Planning & Strategy

Bear Market Silver Lining? An Estate Planning Opportunity

The risk of a recession is growing, and inflation in May reached a new four-decade high. Companies and consumers alike are feeling the pinch and battening down the hatches in anticipation of stormy weather, with markets reflecting less-than-optimistic expectations. Stocks are in the red outside of the energy sector. Lower broad market pricing translates to lower family business valuations. So, what? A market downturn, on the other hand, presents an opportunity for family businesses planning long-term intrafamily transfers and gifting plans to significantly reduce their estate and gift tax exposure. We’ll show you how in this post.

June 6, 2022 Planning & Strategy

Recession, Expectations & Value

Corporate executives are considering how a recession would affect their businesses due to the current uncertainty in the macroeconomic environment. How will your family business fare in the event of a recession, and how are expectations for the future affecting the value of your family business right now? We discuss this impact in terms of value in this week’s blog post by categorizing expectations into three primary categories: cash flow, risk & return, and growth.

May 31, 2022 Special Topics

A Look Into The Family Business Director’s Summer Reading Catalogue

We at Family Business Director hope you all had a relaxing and enjoyable Memorial Day Weekend. This week’s post is a collection of thought-provoking “summer reading” material. We hope you enjoy these pieces on a beach or by a pool, preferably while sipping a tall cool beverage. Happy reading!