Corporate Finance & Planning Insights for Multi-Generational Family Businesses
Who said: “Twitter has extraordinary potential. I will unlock it”?
If you answered “Elon Musk,” you’d be right. His potential acquisition of Twitter has been all over the financial press of late.
In this week’s Family Business Director post, we ask “What can your family business learn from the Elon Musk/Twitter saga”? There are at least two lessons to be learned. Read more in this week’s post.
As recently noted in the Wall Street Journal, large public companies are announcing share repurchase programs at a record pace. Like many issues, what is straightforward for public companies becomes a bit more complicated for family businesses. Two factors in particular increase the degree of difficulty for family businesses. First, the motivation for redemptions can be complicated by personal relationships. Second, price is not a given as it is for public companies. We discuss both of these in this week’s post.
In recent months, inflation has overtaken labor market measures as the most headline-grabbing macroeconomic indicator in the financial press. Inflation typically moves the needle more than other economic measures because of its effects not only on businesses of all sizes but also on consumers. The current inflationary environment has contributed to shifts in consumer behavior thus far in 2022, and it is important that family businesses build responses to changing consumer behavior into their budgeting and forecasting processes. In this week’s post, we take a look at key considerations family businesses should be thinking about in their response to the current inflationary environment.
Recently we had the opportunity to attend (virtually) the Johns Hopkins All Children’s Foundation 24th Annual Estate, Tax, Legal & Financial Planning Seminar. This year’s keynote speaker was Pamela Lucina, Chief Fiduciary Officer and head of the Trust & Advisory practice for Northern Trust Wealth Management, one of the country’s largest trust companies. Her keynote presentation highlighted the characteristics of successful families and provided practical strategies to avoid mistakes commonly seen in the administration of multigenerational wealth plans and trust structures. In this week’s post, we summarize Ms. Lucina’s nine key observations.
This week, we welcome Tim Lee to the Family Business Director blog. This post originally appeared as an article in a recent Mercer Capital publication, The Transaction Advisory Update. Many family businesses will find the post interesting because it provides touch points and practicalities for identifying viable merger and acquisition targets and assessing strategic fit.
The list of forecasting cliches is long (thanks, Yogi Berra!), but we were recently reminded of a good one: there are only two kinds of forecasts – lucky and wrong. That reminder came from an article by Joachim Klement 10 Rules for Forecasting.
Klement’s list is focused on macro level economic forecasting, but several of his rules apply equally well to the micro level of individual family businesses. In this post, we will consider four of Klement’s rules in the context of family businesses.
Here at Family Business Director, we are focused on the numbers of family business: measuring and assessing financial performance, establishing dividend policy, setting capital structure, making capital budgeting decisions, and structuring shareholder redemptions. All that said, we also recognize that family business leaders face many other critical challenges. So, in this week’s post, we provide a quick roundup of some of the best pieces we’ve come across recently dealing with management succession, governance, attitudes toward wealth, family relationships, board dynamics, and more.
Capital budgeting tools are ideal for answering the question: Is the proposed capital project financially feasible? Too often, however, we see these tools being used to answer what seems to be a related question, but one that the tools are simply not designed to answer: Should we undertake the proposed capital project? The first question opens the door to the second, but the tools of capital budgeting – no matter how sophisticated or quantitatively precise – cannot answer the second. To answer the second question, family business directors need to consider three qualitative questions identified in this post.
Kicking off with the inspired lyrics, “Down dooby doo down down,” Neil Sedaka assured legions of teenage girls in 1962 that “Breaking Up Is Hard to Do.” Sixty years later, the actions of the Follett family are telling family business directors that maybe breaking up is not so hard after all. In this week’s post, we explore the question “Why do different businesses sometimes need different owners?” by examining the Follet family’s recent sale of each of its three operating divisions to a different buyer.
Family business directors are often afforded a luxury that their publicly traded counterparts are not: the ability to focus on and plan for the long term rather than solely the next quarter’s earnings report. While family businesses may not have the in-house economists and research departments of the larger public, it is crucial for the management and boards of family businesses to keep tabs on the overall economic environment in which they operate, as an understanding of the metrics and trends driving or hampering growth in the economy can inform effective and relevant strategic, tactical, and operational planning and decision making aimed at maximizing long-term shareholder returns. With that, we take a look at a few of the broad trends that bore themselves out in the U.S. economy through the end of 2021 and the first months of 2022.
