Upon advice from the board, the Thomson family decided to put their company up for sale. “If we don’t sell the company we will destroy it as well as our family”.
M.E Elevators Ltd. was a manufacturer of overhead travelling cranes that was experiencing a constant decline in margins. The company was made up of two branches of the same family; one branch was in charge of management and the other one challenged all measures taken by them. Accusations had been getting out of control and there were more family politics than company politics.
This period coincided with pressure from two multinationals in the sector that, facing excess capacity, began to lower their prices to get rid of smaller competitors.
If the Thomson family wanted to compete with these titans, they would need a united team with a common strategy- something impossible to expect from such a family. Nevertheless, some partners were not willing to abandon the ship that they considered their life. They asked themselves: “how can we look for an investor who will let some of us leave and some of us stay? How can we stop family members betraying others? How can we do it quickly so that the company doesn’t continue deteriorating?”
This is very common. The founding brothers are no longer around and their sons (now cousins) disagree about the management of the company.
Sometimes it is the owner who foresees future conflicts between his sons and chooses to sell the company in order to help each of them have an independent business career and above all preserve family peace.
Other times it is the son or wife of a company owner who is in conflict with other partners or the board of directors and the owner, now older, foresees problems when he is no longer around.
Such situations should always be addressed as soon as possible. Considering the sale of a company is particularly important when the company is a problem for the family or when the family becomes a problem for the company.
This type of decision is one you want to tackle with plenty of time and not wait until your options are limited. If approached with time, there can always be a good solution.
I remember a shareholder with a 15% share of the family business was not happy and wanted more dividends. He was referred to us and asked for help to sell his share and avoid more family conflicts. We explained to him that with a company like his, it would be very difficult to sell a minority stake of the company to an outside investor and that his siblings were the most likely potential buyers. After analyzing the company, we saw that it met all the requirements for private equity. We then asked our client to present this information to his siblings. We explained the situation to them and encouraged them to search as a group for a financial investor. Trying a different approach led to an outcome in which everybody won. Everyone was on board with the idea which led to a satisfactory result for all parties involved.
This article was written by Enrique Quemada, Chairman of ONEtoONE Corporate Finance Group.
