Family Business Director

January 28, 2019 Performance Measurement

How Much Money Does Your Family Business Really Make?

In our last post in this series, we focused on operating income, which is a critical measure for evaluating the performance of management since it is unaffected by financing and tax decisions made by the board of directors.  Net income, on the other hand, reveals how those board-level decisions influence your family business’s earnings and ability to pay dividends.  Everyone likes to talk about EBITDA and EBIT – and those are important metrics – but only net income measures the increase in the family’s wealth from owning the business.

January 21, 2019 Shareholder Engagement

How to Constructively Engage with a Dissatisfied Family Shareholder

The authors of a 2018 article on the Harvard Law School Forum on Corporate Governance and Financial Regulation identify three components of an effective response by public companies to activist investors.  We think the recommendations translate well to family business boards dealing with one or more disgruntled family shareholders.

January 14, 2019 Planning & Strategy

Is Your Family Business Ready for the Next Recession?

Now is the best time to think about how your family business is positioned for the next recession, whenever it comes.  In this post, we review some ways family business directors can prepare their companies to survive (and perhaps even thrive during) the next recession.

January 7, 2019 Dividend Policy

Distribute or Reinvest?

Woolrich Case Study

A recent article in the Wall Street Journal chronicled the slow demise of the Woolrich Woolen Mill.  For the first time in the company’s 170 year history, it will no longer have any U.S. based production.  The Woolrich saga is a vivid reminder of how challenging the appropriate balance between dividends and reinvestment is for family business directors (and of the real-life consequences those decisions can have).  For this post, we asked two (hypothetical) colleagues with differing perspectives to review and comment on the recent story.

January 2, 2019 Special Topics

Five Questions Family Business Directors Should Think About as 2019 Begins

The new year provides a natural opportunity for family business directors to think about the current condition of their family business and ponder what the future might hold.  In this first post of 2019, we identify a handful of questions that family business directors would do well to think about.

December 17, 2018 Performance Measurement

What Business Is Your Family Business In?

When engaging in shop talk about a client project, our colleagues inevitably start by asking, “What business is the client in?” In nearly all cases, the appropriate response to the question is a brief description of the client’s industry. But for a small minority of clients whose financial performance is truly extraordinary, the correct response is that they are in the “money making” business. For these clients, the particular “it” of what they do is secondary to the fact that they make a lot of money doing it. Has your family business joined the exclusive club whose members are in the “money making” business?

December 10, 2018 Capital Budgeting

Is Your Family’s Capital “Lazy?”

What We’ve Been Reading

At a recent meeting with longstanding family business clients, management mentioned that one of their independent directors had introduced the term “lazy capital” into the family’s vocabulary.  We had never heard that term before, but it perfectly encapsulates something we see at too many family businesses: an undisciplined capital allocation process that tolerates sustained underperformance.  We ran across a couple articles this week that, while written with public companies in mind, made us think about the perils of “lazy” family capital.

December 3, 2018 M&A

Evaluating Acquisition Offers To-Do List

In last week’s post, we explored how to respond to unsolicited acquisition offers.  This week’s to-do list is about being prepared for such offers if and when they come.

November 26, 2018 M&A

How Should We Respond to an Acquisition Offer?

Successful businesses don’t have to go looking for potential acquirers—potential acquirers are likely to come looking for them. Most of our family business clients have no intention of selling in the near-term, and yet they often receive a steady stream of unsolicited offers from eager suitors. Many of these offers can be quickly dismissed as uninformed or bottom-fishing, but serious inquiries from legitimate buyers of capacity occasionally appear that require a response.

November 12, 2018 Planning & Strategy

AutoZone Provides Roadmap for Management Succession

The Founder’s Exit Doesn’t Need to Be the End of the Story for Shareholders

Management transition is a sensitive topic for many family businesses.  Founders of successful family enterprises are by definition exceptional individuals.  The challenge for family business directors is ensuring that the unique attributes of key managers contribute to the sustainability of the family enterprise instead of crippling the business through unhealthy over-reliance or dependence on a single individual. Pitt Hyde’s (AutoZone founder and long-time director) recently announced transition highlights three lessons for family business directors and managers.