Martin Salas

Key steps for a successful family business sale

Family Business Advisory

Published in Semana Económica magazine on 12/15/2017

The sale of a family business always entails an economic and emotional impact for members of the family. Although six out of seven family businesses disappear when they pass into the hands of the third generation, only up to 20% of families have expressed willingness to sell a partial or total share, according to PwC. The consensus of sale among family members is key.

Here the recommendations

• Choice of the right partner. It is essential to have a buyer with a philosophy that aligns with the principles of the family, because its public image will be linked to the conditions in which their employees remain. Even in slowing economic contexts, buyers with a long-term vision are preferred over those that offer just the highest price.

• Closing process. Confidentiality and due diligence can have a wasting away effect, especially when potential buyers are not local- two-thirds of the relevant purchasing transactions recorded this year in Peru have been made by international buyers.- or are not part of the industry. The confidentiality handling, talent retention plans and a good data room are key to succeed.

• After-sale plans. The plan to invest the new capital can range from opening another family business to making financial investments. In the case of opening a new family business, the non-compete clauses, valid generally for at least two years, are part of almost all transactions and reduce work options for the sellers. In the emotional side, it is key to anticipate the effects of family dynamics without the company in which they interacted.

• Establish a family office. One of the most usual paths to grow the new capital is to establish a family office or be part of a multifamily office. This option is very common when there is no alternative operating business in which to invest, or if there is excess capital that the family wants to diversify. The minimum should be around US $ 10 million. In smaller amounts it is recommended to go to financial advisors or to the traditional private banking.