Corporate Finance & Planning Insights for Multi-Generational Family Businesses
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.
Estate planning may appear to be less pressing than other issues on your family business’ radar. However, the positive impact of effective planning on the long-term health of both the family and the family business is hard to overstate. In this video, Atticus Frank covers some reminders and quick to-dos to help you and your family implement your estate planning goals.
The failure of Silicon Valley Bank will be talked about for years. What really happened? What caused SVB to fail? Was it just the long-term Treasury securities that everyone has talked about? Well, no. SVB was on a self-imposed path to destruction that had been waiting for an adverse change in the economy or a rising interest rate environment to kick it into oblivion.
There are, indeed, lessons for family business directors from the failure of Silicon Valley Bank. In this week’s post, we discuss four.
In this week’s post, we attempt to divert your attention from interest rates and banking crises by looking at recent private company transaction multiples and some implications of these measures. As detailed in the latest edition of “Mercer Capital’s Middle Market Transaction Update,” transaction activity, both in terms of deal values and volume, ended 2022 with a thud, as expected. Multiples on deals across all size tranches in the middle market (which we define as deals with total enterprise value between $10 million and $250 million) fell to close the year—implying a broad decline in private company valuations in that time. However, asset prices across most classes were susceptible to these declines, creating opportunities for prudent family business managers and directors to evaluate potential transactions in a “down” market. Family business owners should not bury their heads in the sand regarding the current environment–one of the most important facets of a successful transaction is that sellers have reasonable and informed expectations of what their business may command in the market. These reasonable and informed expectations are difficult to develop without a solid understanding of current market conditions for privately held businesses.
On January 1, 2021, Congress enacted the Corporate Transparency Act (the “CTA”) as part of the Anti-Money Laundering Act of 2020. The main purpose of the Corporate Transparency Act is to protect the United States financial system from being used for money laundering and other illicit activities. Effective January 1, 2024, the CTA requires a range of different entities to file a report with the U.S. Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”). The CTA regulations are written so broadly that nearly every family business in the U.S. will be swept under this new law.
So, what does that mean for business owners? In this week’s post, we answer the main questions stemming from the Final Reporting Rule of the Corporate Transparency Act that will most likely affect you and your family business.
