CONFLICT ABOUT KEEPING OR SELLING FAMILY BUSINESS

Bernie Kliska

When family members debate whether to keep or sell their business, anger and tears often are part of the process. Differing interpretation of family’s legacy or level of wealth causes relatives to take sides against each other. Often these battles include arguments over a deceased patriarch’s or matriarch’s true intentions.

Inactive family shareholders may demand a sale for diversification, to create liquidity, to reduce risks or to have a better financial ‘return” on their capital. Those who want to keep the business may see growth opportunities which need family capital, or sometimes they may just want to preserve their own job and  lifestyles. Nothing accelerates tension in a family system more than telling someone his “inheritance” is locked up in the family business. Sometimes the insiders view the outsiders’ family capital as “theirs” and resent what they see as meddling when the outsiders begin asking questions about “our investment

Fireworks will often result when the family conflict includes,poor communication and listening skills, inability to accept change or differences, unwillingness to compromise and lack of respect for others. The family needs to develop a process that focuses on the best decisions in realizing mutual objectives. This is easier said than done, since solutions require trust and commitment from both sides. A cautious and respectful process may take time but can result in favorable agreements and potential transactions that both sides view as”fair”. For most business families what’s “fair” is not the highest price but a price and terms that lead to a graceful exit. Even if you get to deposit a big check if the business is sold, some family members are likely to experience some loss of power, authority and involvement. They may need to find another challenge fast to fill the void.

2 thoughts on “CONFLICT ABOUT KEEPING OR SELLING FAMILY BUSINESS”

  1. This is usually the beginning of family fights. It happens every time. So if the parents are still alive, they should do something about the property before they die to prevent conflicts from children.

  2. An emerging trend we have seen relating to the sale of the “family” business, is for the older generation to help the younger generation financially & with strategic planning pursue entrepreneurship under their own flag prior to selling the “family” business. This strategy allows younger generations to pursue the entrepreneurship that is in their “blood”, while the older generation has the ability to allocate appropriate resources to a less seasoned entrepreneur and create an exit strategy for themselves where they receive maximum value for their business and can estate plan appropriately for heirs who did not desire to be involved in the “family” business.

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