Family Business Director

October 24, 2023 Capital Structure

Decisions, Decisions: 3 Questions to Start Thinking About Capital Structure

The ongoing economic uncertainty has prompted a noticeable shift from cash flow-based loans to asset-based loans, as companies navigate the complexities of debt repayment and capital structure optimization. This trend, accentuated by rising interest rates and inflation, calls for family business directors to critically assess their assets for collateral and understand their borrowing capacity in the context of risk management. This post presents key questions directors should be asking, emphasizing the nuanced balance required in capital decisions, especially when considering industry benchmarks and future financial security amidst economic disruptions.

October 16, 2023 Planning & Strategy Taxes

An $80 Billion Estate & Gift Tax Valuation Update

3 Things to Do When Selecting a Business Appraiser

The Inflation Reduction Act allocates an $80 billion budget increase for the IRS, significantly boosting enforcement capabilities, particularly targeting complex tax filings and high-dollar noncompliance. Recent data indicate a stable trend in gift and estate tax audits, but the increased focus on wealthier individuals hints at a potential shift, urging family businesses and estate planners to brace for more scrutiny. As the landscape evolves, selecting a seasoned business appraiser becomes crucial for family businesses, underscoring the importance of expertise, early involvement in tax planning, and high expectations for appraisal accuracy and thoroughness.

October 10, 2023 Dividend Policy

Should I Stay, or Should I IPO?

Birkenstock, the renowned comfort shoe brand, is poised for its initial public offering (IPO) this week, reflecting its recent surge in popularity amid the shift to casual fashion during the pandemic. However, with revenue growth slowing when adjusting for price increases, Birkenstock faces the challenge of convincing investors their sandals are more like sporty Nike or Lululemon, and not like Crocs. Although most family businesses will never go public, this post focuses on the intricate decisions that family businesses must make regarding dividend policies and capital allocation, to determine what kind of company their family business is.

October 3, 2023 Planning & Strategy Special Topics

Why ROIC Matters for Family Business Directors

New Video Released on Family Business On Demand Resource Center

Revenue growth and profitability are critical measures for the health of any family business, but by themselves, they tell only half of the story. As a family business director, you need the whole story. We’re not aware if Paul Harvey was a financial analyst, but if he were, we suspect his favorite performance metric would have been return on invested capital (ROIC), because it tells you the Rest of the Story.

September 19, 2023 M&A

Fall 2023 M&A Update

Recent data indicates a decline in middle-market transaction activity and deal multiples for private companies in the second quarter of 2023, influenced by rising interest rates and economic uncertainty. However, the data also shows that there are still transaction opportunities for quality businesses coming to market.

September 12, 2023 Shareholder Engagement

You Can’t Spend the Same Dollar Twice

In the world of family-run businesses, the task of capital allocation poses unique challenges, especially with a diverse shareholder base that includes family members with varying financial needs. While some depend heavily on dividends to fund their lifestyle, others focus more on long-term capital appreciation. This article delves into how successful family businesses strike a crucial balance between fueling business growth and meeting shareholders’ liquidity needs, exploring the tough decisions that can make or break both family harmony and business success.

September 5, 2023 Shareholder Engagement

Five Reasons to Conduct a Shareholder Survey

New Video Released on Family Business On Demand Resource Center

In this video, Atticus Frank breaks down the top five reasons why your family business should consider conducting a shareholder survey. He emphasizes how these surveys can provide critical insights into shareholder perspectives, facilitate informed business decisions, and enhance communication among family members involved in the business. From uncovering deeply held views to promoting educated and engaged shareholders, the video offers valuable guidance for multi-generational family businesses looking to align interests and build trust.

August 29, 2023 Special Topics

Review of Key Economic Indicators for Family Businesses

The U.S. economy defied expectations by growing at an annualized rate of 2.4% in the second quarter of 2023, outperforming consensus estimates and showing resilience against the Federal Reserve’s ongoing rate hikes. While inflation rates have moderately stabilized, economists forecast a potential slowdown in GDP growth for the upcoming quarters. Explore this delicate economic balancing act, including insights from the Fed’s latest meetings and how these developments could influence both consumer and investor behavior.

August 22, 2023 Planning & Strategy Taxes

Navigating the Estate Tax Horizon

The Time Is Now

There is an urgency to consider a range of estate tax strategy options in order to maximize gifting family wealth rather than family drama. The options range from straightforward gifts to heirs, accelerated gifting, use of irrevocable trusts, and other estate freeze tactics to lock in assets at current value and transfer future appreciation to heirs without triggering additional taxes. Why? The current basic exclusion amount ($12.92 million per individual) is due to sunset to its pre-TCJA level of $5 million, as adjusted for inflation, at the end of 2025. Tax planners expect a spike in estate planning transactions between now and then. Don’t be caught unprepared. Read more in this week’s post.

August 15, 2023 M&A Planning & Strategy

Private Equity (Still) Wants to Buy Your Family Business

Private equity and institutional investors have been increasingly targeting family-owned businesses for potential acquisition. Recent industry data shows that smaller deals account for over 61% of all private equity transactions in the first quarter of 2023, and founder-owned business purchases, especially those valued under $100 million, are rising. In this week’s post, we look at some of the pros and cons of private equity investment in your family business.