Peter Munro, CEO of Turner-Munro International, a large family-owned furniture manufacturer, finds himself at a crossroads shortly after the death of his long-time business partner. Should he sell the business or keep it in the family?
Peter, age 69, never imagined that he might consider selling the business that he and his partner Lawrence Turner founded nearly 40 years ago. Childhood friends, Peter and Lawrence became business partners in their late 20s. Together, they built a sizeable, profitable company, one of the largest furniture manufacturers in the region.
Peter and Lawrence took special pride in being the largest employer in their hometown. And they were prouder still when four sons, two from each family, joined them in the business. The four sons, all in their mid- to late-30s, have been in the business for 10 years or more. Each completed college and worked for several years in the industry before joining the family business. Peter's sons now serve in executive level positions, one heading up sales and marketing, and the other leading a highly profitable division of the company. Lawrence's older son works as a production manager, while his younger son is the chief financial officer for the company.
Over the years, Peter and Lawrence enjoyed a wonderful partnership. Lawrence was a practical businessman, with a quiet, steady demeanor that lent itself well to managing people and production. In contrast, Peter was a vigorous force behind Turner-Munro, taking on new and sometimes risky business ventures. In this fruitful business marriage, Lawrence was happy for Peter to look for opportunities to grow the company, while Peter was content to let Lawrence have total control over management and operations.
Sadly, Lawrence died a year ago after a protracted illness, and Peter was left to lead the business without him. Shortly before he died, Lawrence asked Peter for his promise to safeguard the business, and to take care of his wife and children as he would his own.
A year later, the business is in a weakened condition. In the months following Lawrence's death, the company lost several major accounts due to significant delays in production. In the aftermath, Turner-Munro's biggest competitor wooed several long-time employees, and for the first time in its history, the company has experienced high turnover among production employees. Most troubling to Peter are the serious conflicts that have arisen between the two families, as each of the four sons openly has vied for the position of "second-in-command."
Peter has begun to contemplate selling the company. A large, publicly traded company looking for an acquisition in Turner-Munro's market has contacted him. Although Peter hasn't yet shared this information with the other family members, he is prepared to engage in some preliminary discussions with the public company.
Peter is of two minds. From a business perspective, he thinks it prudent to start negotiations now, before Turner-Munro falls into a deeper decline and the family relationships deteriorate further. He has grave doubts about whether the four sons could forge a successful partnership. He remembers his promise to Lawrence, to take care of his widow and sons. A substantial buyout would certainly accomplish that, wouldn't it? Peter lies awake at night wondering what Lawrence would want him to do. He wonders himself, whether the business would be a blessing or a burden to the next generation of Turner-Munro family members.
Turner-Munro is in the midst of a change process precipitated by the death of one of the founders. Change can involve conflict, even turmoil, as can be seen by the deteriorating relationships within and between the two families, a decline in productivity, employee turnover, and loss of major accounts. Peter's only hint at any succession planning is a promise Peter made to take care of Lawrence's wife and children.
Peter's final challenge as a founding entrepreneur is to shepherd the company and the two families through the decision to keep or sell the company. While he may be worried about the viability of the company and the ability of the four sons to forge a successful partnership, Peter must develop a sharper vision of what he wants for the company. He must quickly restructure the business so that it can succeed or sell it to someone who is prepared to make the hard decisions that he as a founder may no longer want to make.
The decision to keep or sell the business should not be made unilaterally as this would risk further rupturing the relationships in and between the families. He should engage all family members, key managers, and others in the business to discuss and clarify their aspirations and expectations about the future. For those wanting to keep the company, developing a vision for the future is important in planning strategically for the company. Peter must now act out of collaboration with the four sons, all of whom have enjoyed their own degrees of success with the company.
Time is not on Peter's side, as the business is in a weakened condition and a buyer is available. Peter may need to hire an outside manager to stabilise management and operations in the near term. These steps might help Peter avoid a rush to judgment about selling the company, and would allow him to set in place a process for deliberation among family members and other key stakeholders.
Rosamond Tompkins is President of Family Business Strategies based in Northern Virginia.
The initial impression on reading the story of Peter and Lawrence is that there has been no planning for succession, estate or pensions. This would be at odds with the depiction of Lawrence as a 'practical businessman'.
The character of the two founders formed the basis of a successful partnership, but now an essential element is missing and the business is suffering. Lawrence was effectively the CEO and Peter is unable to fulfil this role. Additionally, it would appear that none of the sons are naturally providing the leadership that is required. The big question is, will Peter make a decision quickly enough to start the necessary steps to resolve the issues? Peter needs to stop the infighting amongst the four sons, as this will be contributing to the unrest amongst the employees.
The business needs to bring in an interim CEO quickly to provide leadership in those areas covered by Lawrence and to provide some support to Peter. This is essential to provide time to decide what to do and to stop the value of the business declining further. The sales process will be protracted if the best price is to be obtained – and a fire sale will not achieve Peter's promise to Lawrence shortly before he died.
Peter needs professional advice in two areas: to look at how the business could be organised to continue ownership within the two families; and to provide him with expertise in selling a business, building a team to set the business up for sale, and to ensure the negotiations go well. If handled correctly, the two processes can proceed in parallel, so that at the appropriate time a decision can be made based on fact and understanding.
Peter should tell all four sons what he is going to do. This should stop them in their tracks and give them something else to think about. The entrance of an interim CEO will also 'bring them to their senses', especially as this will demonstrate that an external CEO is an option for the future of the business.
John Freeman is a Partner in Business Analytics (UK).