Minority shareholders Over the years the business has granted so many corporate shares to children and grandchildren that passive shareholders now burden operations. “Problems can arise when people inactive in the business must be consulted to one degree or another about key management decisions,” says Richard R. Spore, an attorney with Memphis-based Bass, Berry & Sims (
bassberry.com). “Passive owners often resist shouldering the risks of change and can have conflicts of interest with those running the enterprise.”
Underperforming personnel A second-generation family member who recently joined the company has underperformed to the extent that she must be terminated. Te organization risks losing control of her stock.
Valuing the Stock
Any of the above events, and others like them, can create hard feelings among family members. Tey also can disrupt business operations and even result in the loss of managerial control to third parties unless a carefully worded buy-sell agreement has set forth appropriate procedures.
Because most solutions to ownership crises require the recapture or transfer of company stock, any successful buy-sell agreement must first specify how corporate shares
will be valued. Setting a reasonable price can be difficult, though, when people on either side of the negotiating table push for assessment formulas that favor their interests. Tose relinquishing stock will naturally seek the highest value possible.
Te challenge can be especially great when individuals expect the value of their holdings to be equivalent to publicly traded corporations. “Any business’s selling price will typically be less if the transition is with family members rather than third-party buyers,” says Brownell. “One reason is that external buyers who already have human resources, accounting, legal, and other support departments will not need the redundant ones in a purchased enterprise. Tat makes the remaining parts of the business more valuable. In contrast, a next generation buyer will need to retain those support departments. Te fact that there is more expense involved in keeping them reduces the value of the purchased organization.”
Te more expansive blend of interests characteristic of a family operation also can create confusion about value, says Brownell. Negotiations will need to aim for a price that represents a win for outgoing and incoming family members, while also leaving sufficient reserves to sustain the business as an ongoing enterprise for the employees and the customers. “Te need to ensure that the business thrives and
TPI Turf News November/December 2022
119
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100 |
Page 101 |
Page 102 |
Page 103 |
Page 104 |
Page 105 |
Page 106 |
Page 107 |
Page 108 |
Page 109 |
Page 110 |
Page 111 |
Page 112 |
Page 113 |
Page 114 |
Page 115 |
Page 116 |
Page 117 |
Page 118 |
Page 119 |
Page 120 |
Page 121 |
Page 122 |
Page 123 |
Page 124 |
Page 125 |
Page 126 |
Page 127 |
Page 128 |
Page 129 |
Page 130 |
Page 131 |
Page 132 |
Page 133 |
Page 134 |
Page 135 |
Page 136 |
Page 137 |
Page 138 |
Page 139 |
Page 140
