When Family Shareholders Want Out

Too Many Aunts, Uncles, and In-Laws Who Own Stock and Have Clashing Interests and Personalities can Bring a Company to its Knees.
Here’s how to Buy Out Some of Your Family Shareholders to Preserve the Peace.

by Harvey D. Shapiro

Death, it sometimes seems, may be the easiest way out of a family business. With proper attention to insurance, succession, and estate planning, those who leave this veil of tears can also depart from their family firm with limited impact on the business. Other exits are often decidedly more traumatic for the businesses and the individuals involved.

Nonetheless, many family business owners have to realize there inevitably will come a time when some shareholders decide they want to do something else with their time and money. They may want to convert their investment into assets that are more liquid in order to meet other personal or business needs; they may want to diversify their assets to avoid relying too heavily on the company; or, they may find themselves tired of the business–or (perish the thought) their relatives. More…

Bridging the Valuation Gap

Determining what a Share of Family Business Stock is Worth can Lead to
Conflict Unless Middle Ground is Found

by François M. de Visscher

Disagreements over the valuation of family business stock are prevalent and increasing today. The rising public equity market, combined with the current hot acquisition environment, has widened the gap between the high valuations shareholders can obtain from buyers and the low valuations that help minimize gift and estate taxes.

The situation is even more complex in families that are already transferring ownership to the next generation. Often there is an expanded shareholder base composed of relatively well-educated and sophisticated baby boomers. When these savvy owners seek liquidity of their stock, their value expectations are substantially higher than the “estate valuation” sought by their seniors for succession transfers and intrafamily buy-sell agreements.

The question for current owners is: In which direction do I go? More…