About a year ago now, I flew to a major city to have breakfast with a client and friend of many years who is second-generation chairman, CEO, and lead family member of a very successful, third-generation family business. We have worked for this client for about 30 years.
Prior to that breakfast, my client and I had had two or three significant discussions about ownership and management transitions and shareholder liquidity. At breakfast, he had important things on his mind about shareholder liquidity for himself and his immediate family, for his second-generation siblings, and for other significant shareholders of this successful private company. He was leaving the country that day for some time and faced an important board meeting upon his return. He wanted to talk, and so we did over a lingering breakfast early on a Sunday morning in a city distant from Memphis.
I had been speaking with his chief internal adviser (and client and friend) about similar things for some time. But things hadn’t quite clicked at this point for all the parties. The chairman wanted to talk privately.
What I was recommending was a significant stock repurchase from family members and other significant owners, a special dividend, or a combination of the two strategies for private company liquidity. Because of my familiarity with the company over many years, I knew that the transaction I was suggesting could be financed by the company with reasonable risk.
About mid-year 2019, the company engaged in a substantial share repurchase and special dividend combination transaction. I should add that the transaction occurred at Mercer Capital’s appraised price, as had all previous transactions in the company’s stock for many years (to the tune of perhaps $200 million or more over the years). The special dividend benefited all shareholders pro rata. Combined with the stock repurchase plan, which was available to family and non-family shareholders, the special dividend dampened the dilution of the buyback for family shareholders who sold shares, and provided a one-time liquidity event for all shareholders. Existing shareholders and qualifying employees were simultaneously offered the opportunity to purchase shares. As I said, it was a significant transaction.
Lest anyone think I’m suggesting I did all this, I did not. The company’s extremely capable financial staff planned the details of the transaction, checked the boxes for any tax-related issues, arranged its financing, and executed its many details flawlessly. My role was more on the conceptual side and in helping the parties see the near-term and long-term benefits of such a transaction.
Yesterday, I received an email from my friend, literally out of the blue. The subject of the email was: when is our next turning point breakfast?
The short text touched my heart. I’ve been working with company clients for going on 40 years (ouch!). I’ve done a great deal of litigation work over the years, but the satisfaction of that cannot compare with helping private company clients achieve their goals and objectives for management and ownership succession, and for liquidity for owners now, before anyone has to sell a company.
The text was very short.
We did everything you said to do at breakfast at the [hotel] — it changed our lives — when can we do that again? — Name
Well, Name, we can do that as soon as we can make our schedules align.
I have to say, that email yesterday morning , was the most gratifying thank you I have ever received from a client.
If you are at a turning point in your business life, perhaps it is time for a turning point breakfast — or lunch or meeting or dinner. We are available here at Mercer Capital to discuss your family business needs in confidence. That conversation might actually be a turning point for you, your family, and your other owners.