Does anyone have experience approaching/acquiring family businesses?

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August 19, 2020

by a searcher from Queens University in Edmonton, AB, Canada

I see companies where there is meaningful family involvement (kids, brothers, etc), and assume they've got a succession plan lined up. Does anyone have experience talking to owners or acquiring businesses in this situation that would suggest the contrary? TIA

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Reply by a searcher
from University of Pennsylvania in Chicago, IL, USA
This is common in small business - yet another factor, typically a potentially explosive one, to manage and assess. Things like above market comp, ineffective people kept on the payroll, and in some cases people drawing salaries that don't even come to work. A thoughtful approach is essential. Ask yourself... If I had fire Aunt Sue, or Brother XYZ what would happen? In a lot of cases, I think you have to consider it an "all or none", i.e. you retain the family members in current positions (because you think you can work with them and they are doing a good job, etc.) or you plan to transition everyone out. Perhaps not all at once, but every family member is part of a transition plan so to speak. I have walked away from 1 deal that had a ton of family involvement (not because of it) and I am in the middle of one that has significant family dynamics. I don't love dealing with it, but it is a necessary aspect of the business. There can be a lot of emotional baggage for existing owners as well - people thinking about what now deceased relatives would have wanted them to do with the company. Sometimes people feel guilty about selling. Anyway, as I mentioned above, a thoughtful approach is essential. Good luck
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Reply by a searcher
from Queens University in Edmonton, AB, Canada
Appreciate the insights Matthew. Good to hear that businesses with family involvement still do transact despite the complications
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