A discussion at The Great British Family Business Conference at the Royal Geographic Society in London, March 2018.

For family business owners considering selling a stake in their business, cash is not the most important consideration. Are you surprised to hear this? As Jim Keeling, Chairman of Corbett Keeling Corporate Finance, interviewed Elizabeth and Alan Colleran, husband and wife founders of Duvalay about their experience with an outside shareholder, it became clear that a good relationship with an investor was much more important than the sums involved. The advice and added value that person contributed to the business was valued more highly than the amount of cash invested.

As Jim opened the discussion up to the floor, family shareholders generally concurred that the relationship and chemistry with potential investors would be the most important driver in their decision making. This hallmark of family owned businesses reflects the long-term view and general concern for all involved.  It highlights the need for all stakeholders to be united in their goals for the company, each playing their part and contributing to its success.  

Having established that relationship and chemistry between investor and owner was the most important factor in any transaction, Jim encouraged family business owners to think about what else would be crucial to them. One participant, who had recently lived through the sale of his wife’s family business, described the stress and trauma of the process, which had lasted over two years. It had been one long emotional rollercoaster with the deal on one day and off the next and had really taken its toll on all the family. The Collerans concurred – once they agreed to take on an external shareholder, it took over a year to get the deal in place. Time spent negotiating a deal is time not spent on running the business; everyone nodded their head in agreement. Another critical factor for family business owners is certainty that a transaction will actually go through, with the buyer adhering to the terms initially agreed.

The discussion lasted almost 45 minutes before it finally turned to cash – the amount received for the shares. While obviously important, family business owners appreciated that there is much more to a successful transaction than the initial cash offer that they might receive from a potential acquirer who comes knocking at the door. Jim asked if the audience knew how a business owner might prepare their company in order to maximise proceeds. It was agreed that there is a lot a company owner considering an exit in two to three years can start to do to ensure they have positioned and optimised their business for sale.

When Jim is advising clients, his focus is always on ensuring they maximise what he calls the "Three C's": the optimal result in terms of Cash proceeds, Certainty of completing the transaction and Chemistry with the investor in a potentially life changing transaction. For family business owners Chemistry knocks the Cash king off his perch.