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Recession reaction: the opportunities and threats to the family business

The current economic downturn provides a range of threats and opportunities for family businesses but, fundamentally, it forces families to question whether running the business is really what they want to do.

This is one of the headlines from a Barclays Wealth and Institute for Family Business meeting that took place in London on Thursday and brought together a range of experts from the field of family business.

"It takes a recession to force families to confront whether they want to continue with the business and whether they still find it enjoyable," said Howard Leigh, MD at Cavendish Corporate Finance, who said he had spoken with several families who were weighing up their options.

In the UK alone there are three million family businesses and 100,000 transactions involving such companies per annum according to IFB director general Grant Gordon.

"If a family decides that it would prefer to exit, it is vital that it begins to plan for a sale today so that when the economy rebounds, it can quickly execute the preferred strategy," continued Leigh, who added that families should not be afraid to take advantage of being a private family business and run it solely for capital return in the future.

However, to ensure that both the family business and any future liquidity strategy are successful, families should jettison any reservations they may have about third-party advice and search out the people who can add value.

By way of example, Penny Webb, CEO of consulting firm Familias & Co, said that family leaders are increasingly turning to non-family executives who have previous experience of managing a company through a recession.

A lack of knowledge about the intricacies of the economy does exist and people should not be afraid to admit that there are people much better placed to help a business through difficult times.

"Good advice is the most valuable commodity that families can have in the current economic climate and they should not be shy about reaching out for help," agreed Mark Kibblewhite, MD and head of UK private banking, Barclays Wealth.

The specific problems that families have to confront are exacerbated by the current climate. In particular, there are real challenges to a family's values structure according to Webb, who warned that families "cannot look after their own as they once did".

This is particularly the case when it comes to inevitable redundancies, and families have to decide between keeping family members and non-family members. "The question is, can they resist the urge to keep the family on the payroll?" said Leigh.

Nevertheless, participants were keen to accentuate the opportunities that exist. "Family businesses are best placed to ride out recession," said Kibblewhite, highlighting their lack of leverage and long-term vision.

Leigh agreed saying now is the time to make any acquisitions or, for those that sold their businesses at the peak, to buy it back at rock bottom prices.

Whether you see the recession as an opening to expansion and acquisition or the chance to sell the burden that the business has become, families should leverage their uniqueness and ensure they achieve the right result for themselves.

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