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Carmina Burana & HMS Pinafore

Succession - not just a financial issue

Ernestgallo  The eponymous Ernest Gallo of the American wine making company has just died aged 93.  What interested me in the newspaper report was that although he had achieved succession in the business with his family having taken over the day-to-day running of the company some years ago, Ernest still went into the office every day until his death. 

I wonder; did he live to such a ripe old age because of the wine or was it that he kept active in the business? What did he do when he went in to the office?  Did he interfere, or was he productive?  How did the next generation feel about it?   I can’t help feeling that it’s a nice way to deal with the emotional side of succession – the difficulty of parting with ones life’s work - if it can be done.  Of course if you have no family succession and must sell the company to a third party, or to a management team in a management buyout, they are unlikely to want the founder “stalking the corridors” after any handover or earn-out period is finished – so it may be a luxury.

 

When planning for succession its good to remember that its can be an emotional issue as well as a financial one.  Many successful entrepreneurs are strongly tied to the “name above the door” either it is their name, or the name they came up with for the business if they founded it.    In a trade sale one might be at least partly influencedErnestjuliogallocolombar_2  by the nature of the buyer and their intentions for the business – indeed when advising on company disposals we always seek the buyers intentions not just their monetary bids. 

In a succession buyout there is the opportunity to achieve more of a tapered reduction in the founder’s role.  But beware this can lead to tensions between the new management buyout team who want to finally get their head in running the business and the outgoing owner manager.  But it can be made to work.  Here’s two ideas which can help.  Perhaps the outgoing owner can be given a courtesy title – president, non-exec, or chairman – to allow him or her to feel some ongoing emotional – if not necessarily practical – link to the business.  Better still he or she can be given specific projects to do for the business.  They will usually have loads of knowledge, skills and experience and doing this would allow the business to access that resource piecemeal rather than having “the old boy stalking the corridors” after he should really have gone.  It might also allow the old boy to finally retire and go fishing after all!

PS apologies to all the young, and young at heart owner directors we have worked with none of whom deserve the “old boy” appellation!

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