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When the Business Is All in the Family

JCR Guest Editor

Family businesses have evolved significantly since their humble agrarian beginnings. Over time, family businesses have become increasingly complex and, for many, the bucolic family farmhouse has been replaced by corporate boardrooms.

Today, family businesses are a critical part of the U.S. economy both as employers and significant contributors to our country’s GDP. Families like the Fords, Roberts (Comcast), Waltons (Walmart), and Kochs, among others, have enjoyed an exalted status among customers they serve and the global business community. As these businesses have continued to grow and mature, interest in their inner workings has also intensified across a wide range of sectors. From Harvard Business School case studies to Lucious Lyon’s succession issues on the television show Empire, family business dynamics have provided a rich tapestry for observation/study that has influenced academics and artists alike.

The complex inner workings of family businesses is the subject of this month’s Journal for Corporate Renewal. Our contributors delve into the governance, operational, and leadership issues that can negatively impact family businesses. Understanding these issues and mitigants is critical to the continued success of family businesses.

While family businesses have certainly thrived, many face a tenuous future due to the pandemic and changing interests among family members. Consider the following statistics: More than 30% of family businesses will transition to the second generation with the percentage declining to 12% for the third generation and less than 3% for the fourth generation.  As such, our contributors for this edition highlight issues affecting family businesses and propose a set of strategies to ensure their important role in the economy.

Leading off is Tobias Keller, a partner at Keller Benevutti. His article focuses on the recent enactment of the Small Business Reorganization Act (SBRA) and the benefits of utilizing a Subchapter V filing for family businesses. The article discusses the opportunities available to the family-owned business before SBRA became effective, followed by a summary of the benefits the SBRA offers family-owned businesses.

Tyrone Courtman, a partner at RSM Restructuring Advisory, provides an international perspective on common pitfalls affecting family businesses in the United Kingdom. Tyrone’s article highlights the operational, managerial, and generational issues affecting these businesses. The article concludes with a cogent list of suggestions for family businesses to avoid insolvency and strengthen their business.

Leadership issues in family businesses is the focus of Sheon Karol’s article. A partner at Paladin, Sheon’s article is a fascinating study on how a family member in a position of power can cause significant harm to a family business. Leveraging from his experience working with family businesses in distressed situations, Sheon provides a “solution set” for dealing with an obstinate leader.

Eva Ringelspacher, a senior manager at Restrukturierungs Partner, explores issues affecting German family businesses. Eva discusses how succession- and customer-related issues are common indicators of distress among family businesses. The article also explores the restructuring alternatives available to these businesses in Germany.

Responsible corporate governance in family businesses is the focus of Geoffrey Raicht’s article. A founding member of Raicht Law, Geoffrey’s article explores how a company’s board and its shareholder base can often impede good decision making when they are comprised of relatives. His article provides sage advice on the role an independent director can have in ensuring family businesses are using sound governance strategies.

In addition to articles on family businesses, this edition contains articles on other businesses that have experienced transformative changes due to the pandemic. As more people were forced to stay home during the pandemic, Pat Schuetz, an associate director at MorrisAnderson & Associates, discusses the boom in grocery delivery services. Meanwhile, Kumar Singla, a managing director at Sherwood Partners, explores how the pandemic spurred unprecedented collaboration and investment dollars in the biopharma industry as part of its heroic efforts to combat the COVID-19 pandemic.

Luis Pillich

Luis A. Pillich

Stout

Luis A. Pillich is a director in the Special Situations Group at Stout. He brings nearly 20 years of private equity, financial advisory, and capital markets experience to Stout’s Investment Banking practice. He has significant knowledge of special situation transactions and has advised companies in all aspects of mergers and acquisitions, complex valuations, and capital raising activities for clients, both domestically and internationally. Pillich has led successful transactions in the manufacturing, distribution, defense, and media industries, among others. He can be reached at lpillich@stout.com.

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