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FUTURE PLANNING


afraid that if I told Michael about the impending sale he would bail out. If he did, I would have a big hole in my management team that I didn’t think the buyers would be thrilled with – they thought Michael was key to the operation. So I waited till the last minute, when the deal was sealed, and finally told him; you know the rest. In retrospect I should have asked him to leave the company a year before I sold it and brought along new management.” John continued, “I golf with a friend who had an


electronics manufacturing business and he had his son on track to be president. After all sorts of disasters, including lots of personality conflicts with other managers – good managers – who ended up quitting, my friend decided to move his son into an administrative position. My friend wasn’t ready to sell the business and figured he could park his son, underwork and overpay him. It became such a joke that productivity plummeted throughout the entire company. The father completely lost credibility when driving cost-cutting measures because everyone could see Junior over in the corner office doing Sudokus all day.” “The father ended up getting so frustrated and


angry with his son that instead of firing him he sold his business to a competitor for a fraction of what it was worth. The father just wanted to end the insanity at work and at home.” William said, “I bet there are all sorts of businesses


“I couldn’t just let him ruin something I had started and run myself for 25 years”


sold at fire-sale prices for that very reason. Conversely, I wonder how many private equity investors or strategic buyers overpay because they simply misjudge the parent–child relationship. As a buyer, you can stare at numbers on a balance sheet all day long and never see what’s really going on between the generations. If a buyer detects a breakdown between the parent and child, just watch the multiples drop – not because the buyer is worried about the quality of management left behind after the sale but rather because they know parent and child want a way out – and fast. I think only someone who has worked in a family business can read a room and make a recommendation on the health of a business. We can tell when the child is being beaten down by the parent – figuratively speaking of course – and we can tell when it’s a true partnership. It is what it is and in the heat of the moment, doing a deal you can’t all of a sudden manufacture mutual respect and trust in front of the buyers. Authentic comments during negotiations are what drive deals to successful conclusions, don’t you think?” “No question, William. I guess maybe that’s why I


did my negotiations in isolation from Michael.” John’s confession hung in the air.


Tom Deans Ph.D. is the author of Every Family’s Business. His controversial view that a family business should never be “gifted” to the succeeding generation has made his book the best-selling North American family business book. Much of the international success of the book is attributed to his prolific public speaking career. Information on how to order a copy of Every Family’s Business or to book the author for a client event, visit: www.EveryFamilysBusiness.com http://www.everyfamiliesbusiness.com/blog/


FAMILY OFFICE: ASIA TOMORROW 87


OPERATIONS


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