Alex was getting old and felt urged to sell parts of the family firm to prevent disputes among his children over firm’s management. He believed he got some generous acquisition offers, but his son and daughter-in-law thought otherwise.
Alex had led the family company with firm hand, ever since he replaced his father as the CEO, more than 30 years ago. His management style was very centralized, and he didn’t involve his children in material business decisions. When his son, Uri, and his son’s wife, Yael, tried to persuade him the acquisition offers he got were too low and didn’t reflect the company’s actual value, he simply refused to listen.
Consequently, Uri and Yael asked for my services, hoping I might be able to get through to Alex and convince him to conduct the selling process in a more cautious and professional manner.
Identifying needs: After meeting Uri and Yael, as well as Alex and his daughter Maya, who also worked in the firm, my impression was that Alex had been negotiating with potential buyers in an amateur fashion. He didn’t observe the matter from a strategic point of view and didn’t seriously consider the firm’s business potential competitors-wise and market-wise. There was a real danger Alex would make a very poor bargain and sell the company for a much lower price than its actual and potential market value.
I also discovered a value-estimation for the company had never been done before, and that neither Alex nor his children were sufficiently familiar with the market in which the company operates.
Moreover, I realized Alex was not experienced in running complex negotiations concerning large transactions such as selling a company. Likewise, his children and daughter-in-law lacked the knowledge and skills needed to take control over the negotiation process, even if Alex allowed it.
Tailoring solutions: I realized it’s not enough to persuade Alex to act more cautiously or to involve his children in the selling process. A macro-level solution was needed to deal with the challenge facing the firm.
In fact, the firm had to go through a professionalization process, which would include both structural-organizational changes and exposing the family to advanced professional knowledge and tools.
Since the members of the younger generation: Uri, Yael, and Maya, were more open to change than Alex, I thought they should be appointed as vice-CEOs and given more management powers, so they could take a significant part in running the firm, as well as in the selling process. At the same time, they had to be equipped with suitable professional knowledge and tools, to become skilful strategists and negotiators.
The process: It wasn’t easy, but through a series of meetings I held with Alex alone and also through wider meetings I organized, including all the relevant family members, I managed to convince Alex that the organizational change I was aiming for, was crucial and would serve the firm’s interests. Alex realized that as CEO he would still have an overall control on the firm, even if the management powers of the younger generation were expanded, and even if he replaced his centralized management style with a more democratic approach, based on dialogue and knowledge-sharing with the vice-CEOs.
Following my recommendation, Maya was appointed as the VP business development of the firm, while Yael was appointed as the COO and Uri was appointed as CFO
Along with external finance and marketing experts, I assisted the new vice-CEOs to make their first steps at the job. These included conducting an updated value estimation for the firm, as well as strategic marketing analysis. This helped us discover which potential buyers could create the most significant synergy between the company’s activity and their own business activity, and so would benefit the most from buying the company.
Tracking down the best potential buyers was crucial to increase the bargaining power of the company in future negotiations. At the same time, I laboured to upgrade the negotiating skills of the CEO and the vice-CEOs through consulting meeting and simulations, and by assisting them in actual negotiations.
After about a year’s time, the company finally sold part of its activity to a foreign buyer. The price was three times higher than the best price offered to Alex before we began the consulting process.
