family business the generation game - isme · • case study 2 – restaurant business staying in...

Family Business – The Generation

Game

October 24, 2014

www.duffandphelps.com/ie

Duff & Phelps 2 October 24, 2014

Family Business - Are you appropriately structured for change?

1. Passing your business on to the next generation

2. Preparing your business for investment and growth

3. Access to funding, stakeholder support and working capital

management


Passing your business on to the next generation

Ask the Hard Questions?

• Are you ready to step aside? Are they ready to step in?

Pre-planning is crucial to a successful outcome?

• Preparing for next generation transition is the same as preparing for the Sale of the business.

Common Conflicts / Mistakes:

1. Technical mistakes

2. Planning without buy-in

3. Surviving spouse gets business

4. The challenge of treating children equitably

Important Guidelines to avoid this:

1. Skillset, enthusiasm and aptitude

2. Identify and get buy-in for who will lead the Business

3. Business plan with appropriate professional advice (Law/Tax/Funding/Growth)

4. Other Attributes (Other Organisational Experience?)



CASE STUDY 1

• Owner requested Debt Restructuring advice

• Unsustainable Debt with Personal Guarantee

• Owner beyond Retirement Age with daughter in the business (qualified accountant)

• Opportunity for Debt Restructure but not with Daughter – Why?

REMEMBER:

• Lack of experience is one of the main reasons for SME failure so family run businesses should

have an immediate advantage as long as the successors are willing and nurtured.



Duff & Phelps October 24, 2014 8

• Case Study 2 – Restaurant Business staying in the family

• Preparing for Smooth Transition – early communication and engagement of the next

generation becomes critical.

• The succession planning process next step is to develop strategies that meet both the

business and family transition needs

• Operating, financial and leadership needs for long term viability; and

• Separately identify the shareholding needs so family remains in tact

• Nurture the next generation to exhibit the values and key competitive advantages of the

business

Preparing your business for investment and growth

• Investment and Growth opportunities should tie into your succession planning in the family

company. The business and succession plan needs to focus on the basics for any business:

1. Finance and Administration,

2. Operations and customer fulfillment,

3. Leadership and management succession

4. Sales and marketing

• Developing a combined strategy to meet both the business and family transition needs i.e.

operating, financial and leadership needs and separately identify the shareholding needs.



• Where are you now as a Business?

• Likely a significant strain to get to now?

– Example: You have made general cuts across the board to survive and now hoping for a

general economic uplift so you start to turn a realistic profit; or,

• Are you more ambitious and have growth and/or investment plans ready to go?

• Need to walk before you can run!

• As funding becomes more readily available – need to get your business investment/growth

strategy adopted and your business ready to attract investment



• How to Prepare Your Company for Growth & Investment

• Simple 3-Step approach:

• Identifying your competitive advantage and differentiating capabilities

• Have you completed a root and branch assessment of your operations?

– Is the operation as efficient as it should be? How do you rank versus your peers /

competitors?

• Assuming you now have an investible business?

– can you sustain more funding to exploit identifiable opportunities?

or if funding is not readily available

– can you reallocate resources and cut costs in less critical areas?


Access to funding, stakeholder support and working capital

management

Conditions for Successful Growth / Investment Plan

• Before seeking funding, you need to identify:

– the underlying business fundamentals are strong

– Undertake an initial review for the proposed restructure/funding appraisal

– Set a realistic timeframe for completion

– Identify Financial Resources and Working Capital / Development Funding

» What is your working capital cycle and burn rate? Is it efficient for the Industry?

» Have you an efficient credit control policy?

» Can you identify the supply and demand for the development plan?

» Have you monitored your business performance historically against budget and can you project the cashflows with some degree of certainty?

» what is the return on investment for you for this funding?

» how and when are you going to repay it?

• Identify the Who? in Vision, Management, Impartial Advisors and Stakeholder Support

» Who is going to drive the business forward and who can obtain stakeholder buy-in?

» If the human resources are not there, include external support to deliver comprehensive package to support investment sought


Access to funding, stakeholder support and working capital

management

Assuming the fundamentals are there, following are a range of funding options available to

suit you:

• Grants

• Various Government Funds / Initiatives

• Traditional Pillar Bank Debt

• Mezzanine Debt / Hybrid Capital

• Private Capital Investment

• Hedge Fund / Corporate Finance Options

If the debt profile of the business is inconsistent with the fundamentals, which show a viable

business whose opportunities have been stymied by the debt overhang, there are also a

number of formal and informal restructuring options available which can combine the above

but the fundamentals need to be there.


Conclusion

Are you appropriately structured for change

Critically assess your business and your key resources

Awareness of funding options available


Duff and Phelps

Senior Debt Restructuring & Business Review Key Contacts


Anne O’Dwyer

Managing Director

Pearse Farrell

Managing Director

Declan Taite

Managing Director

Anthony Carroll

Senior Manager David Farrell

Senior Manager

+353 1 4720730

[email protected]

+353 1 4720740

[email protected]

+353 1 4720740

[email protected]

+353 1 4720714

[email protected]

+353 43 3344 610

[email protected]

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family business the generation game - isme · • case study 2 – restaurant business staying in...

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