Selling the Business

When Charles Scheidt learned in early 2012 that his sons were not interested in taking over the family’s specialty foods company, he knew he had to make some hard decisions for the good of his business, employees and family.

“I decided the worst all around would be to go out, so to speak, feet first,” Scheidt says.

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Lawrence Herbert was dining at a restaurant while on vacation in Turkey in 2007 when he received a call from his attorney. Before leaving for his trip, Herbert had accepted an offer from a private equity company for his company—Pantone Inc., a Carlstadt, N.J.-based provider of color standards and technology, including the iconic Pantone Matching System.

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Selling a family business is an intense process that draws on the skills and experiences of everyone involved—the CEO, owners, management team and outside advisers. Combining family issues with business considerations further complicates the sale process. Understanding what the family business provides to each key family member and addressing these needs ahead of time is essential to getting the required buy-in from the family and, ultimately, the successful execution of a sale.

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Rob and Laura Gordon opened their first restaurant, Top Five Dishes, in Chicago's Wicker Park neighborhood in 1984. The business now has 15 locations across Illinois and more than 600 employees.

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This issue's cover story subjects are different from the families usually profiled in Family Business. While we generally feature families who own an operating company, the Power family no longer are the owners of J.D. Power and Associates, the highly respected consumer survey business founded by patriarch Dave Power in 1968.

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As a teenager working at a pizza restaurant, Jim Grote got his first lesson in customer service. He noticed that one of the owners was generous with pizza toppings and the other stingy. “The one that made good pizza and wasn’t stingy with toppings, his nights were busier than the other guy’s, who watered down sauces and stretched toppings,” Grote recalls.

The value of treating customers well stuck with Grote. This year marks the 50th anniversary of Donatos Pizza, the company that he built, expanded, sold and then bought back.

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Perhaps the most important—and the most frightening—decisions that business owners will face are when and how to transition out of the business they have built. Yet most owners procrastinate about addressing these issues. They then have to make rushed decisions under duress, substantially reducing both the value of the business and their comfort with the outcome.

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Planning for the future of your family business can be one of the most challenging tasks for the family; it is also one of the most critical. One of the most difficult decisions for family business owners is whether to transition the business to the next generation or to sell it.

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A dear friend and former sorority sister recently made the difficult decision to sell her multinational consumer products company—a publicly traded, family-controlled enterprise. While it was a terrific financial transaction, she found it incredibly painful to let go of “her baby,” which was founded by her parents in the 1950s.

As the company expanded over the years, my diligent friend worked her way up to the top leadership position, and she loved every minute. Even during our college years, I can remember her involvement with the company’s marketing.

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We’ve all heard horror stories of a family business sale gone awry. Often the problems result from lack of coordination and cooperation among divergent family factions. Yet with sound advice and good planning, an exiting family won’t just survive a sale; they’ll thrive—personally and financially.

The key to a successful sale is to achieve buy-in and appropriate engagement from all family members involved. Five best practices have been shown to help smooth the transition.

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