Selling the family farm

By Amos Beer

A client of mine is a CEO of a small family business in Manchester (not a farm, a coffee shop…). It has been in the family for over 100 years, she has been running it for the last 30, and has ran out of steam. The next generation is not interested so naturally there is a lot of anxiety over what to do.

After my first meeting with her I sent her a copy of my Exit guide and after reading it she decided to examine 4 options:

1. Soldiering on for a few more years: this went out the window pretty quickly. She just doesn’t have it in her anymore.
2. Finding a buyer for an outright sell: this was hard to swallow in light of the long family history.
3. Employee ownership scheme: this was her initial preference but after further examination she realised it is too complicated. Not all employees are worthy of the same equity allocation, some don’t even need to be there and are only kept due to loyalty, and sometimes funny things happen to employees when they get equity in a business.
4. Finding a CEO to take the day-to-day running of the business off her hands and stay on as a NED: this was eventually the chosen solution. It will give her the peace-of-mind she is looking for, will retain the business in the family for a bit longer, will allow to hire someone that the business can afford in exchange for some equity, and a gradual overall handover.

Exiting any business is complex. Much more so in a family business. Deciding on the exit structure is just the first step, after which needs to come a long process of closing the gap between what the sellers want to get and what the business is actually worth. This is going to be our next step.

The main takeaways from this case:

1. Exit is complex.
2. It is more so in a family business.
3. There is no “right” structure. Every case has its own characteristics and solution.
4. It doesn’t happen overnight so plan ahead.