© wright, johnston & mackenzie llp 2013 recognising the opportunities when advising family...
TRANSCRIPT
© Wright, Johnston & Mackenzie LLP 2013
Recognising the opportunities when advising Family Businesses
Liam Entwistle 14th November 2013
Objectives for this evening
• Develop a “family business perspective” in addition to your
“business adviser perspective”
• Develop an understanding of the challenges family businesses
face
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The “One-Circle” Model
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The Family Business System
Family Business
Emotional
Inward
Little change
Facts Profits
Outward
Fast change
This is where it gets interesting!
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The 3-Circles Model
Family Business
1
2
3
4 5
6
Ownership
78
© Wright, Johnston & Mackenzie LLP 2013
Segment 1 – Family Members
Family Business
1
2
3
4 5
6
Ownership
78
Family Members
Family life in balance withbusiness
Job prospects Future ownership Wealth Family harmony
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Segment 2 – Non-family investors
Family Business
1
2
3
4 5
6
Ownership
78
Non-family investors Return on investment Dividends / profit share Liquidity Exit route Information
Segment 3 – Non-family employees
Family Business
1 34 5
6
Ownership
78
2
Non-family employees
Job security Strategic direction Family influence
on reward Effects of nepotism
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Segment 4 – Family Owners
Family Business
1
2
3
4 5
6
Ownership
78
Family Owners
Same as non-family owners
Info about job prospects
More ownershipin the future
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Segment 5 – Non-family working owners
Family Business
1
2
3
4 56
Ownership
78
Non-family working owners
As for 2 and 3:- Return on investment Dividend / profit share Liquidity policy Exit route Job security Strategic direction Family influence Nepotism
© Wright, Johnston & Mackenzie LLP 2013
Segment 6 – Family Employees
Family Business
1
2
3
4 5
6
Ownership
78
Family Employees
Same as non-family employees
Info about ownership, career andsuccessionprospects
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Segment 7 – Working family owners
Family Business
1
2
3
4 5
6
Ownership
78
Working family owners
All of the above!
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Segment 8 – Family owners and business leaders
Family Business
1
2
3
4 5
6
Ownership
87
Family owners andbusiness leaders
All of the above,plus
Managing conflictsof interest
Focus on vision Not becoming isolated
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Conflict is unremarkable
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They're playing at Family Boardrooms….
How family businesses develop,and how you can be there for
them
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The 3-Circles Model
Family Business
1
2
3
4 5
6
Ownership
78
© Wright, Johnston & Mackenzie LLP 2013
Time changes everything!- crossing boundaries
Family Business
1
2
3
4 5
6
Ownership
78
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Succession Options
What would the senior generation prefer?
1. Appoint Family member
2. Appoint caretaker manager
3. Appoint professional manager
4. Liquidate the business
5. Sell the business
6. Do nothing
Succession options
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EstateEstatePlanPlan
Capitalisationof Business
Tax PlanTax Plan Business Plan
RetirementRetirementLeadershipDevelopment
Career Development
WillsWills
OwnershipSuccession
Business
Family
The Succession Conspiracy
Quality of LifeQuality of Life
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The “Do Nothing” Option !
• The least logical
• The most costly
• The most destructive
Yet sadly
• By far and away the most popular
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Where do Solicitors fit in?•The issues of conflict of interest
• “The Lawyer” reaction to problem solving
• Being first among advisers, and at the heart of the solution
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The role of Trusted Advisor
•Recognised as independent by all the family
•Proactively encourages the family to “get organised”
•Invests time to understand the issues
•Recognises when specialist Family Business Advice is needed
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Where specialist advice is likely to be required 2nd Generation onwards
• Succession planning • Wills, tax advice, Powers of Attorney, estate planning, wealth
planning, trust creation and administration, Family partnerships• Ownership, Governance & Management
• Articles of Association, Shareholders agreements• Constructing effective Boards
• Effective use of Non Exec Directors
• Managing branch politics
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Where specialist advice is likely to be required 2nd Generation onwards
• Managing Conflict in a family business• Mediation
• Employing and remunerating Family and non Family
• Dividend policy vs executive bonus
• Communicating between Board & Family
• Interpreting and implementing a Family Constitution
• Family councils
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Opportunities for Solicitors?
•Develop the skills and knowledge required to TRULY understand your client (the family enterprise)
•Invest time with your client to gain that understanding and in the process become the TRUSTED ADVISOR
•Help the client understand the predictable issues heading their way and persuade them to create a blueprint for tackling them
•Profit from the legal work that will flow from the business and the family
•Collaborate with other advisers to help the client
© Wright, Johnston & Mackenzie LLP 2013
© Wright, Johnston & Mackenzie LLP 2013
Recognising the opportunities when advising Family Businesses
Liam Entwistle 14th November 2013