Wolper Subscription Services has been acquired by LM Information Delivery
Background: Headquartered in Easton, PA, Wolper is a full-service information management resource, providing customized solutions for subscription management and related resources including print and electronic, foreign and domestic magazine and journal subscriptions, as well as books and e-books, databases, site licenses, and state-of-the-art information management tools.
- Cassel Salpeter:
- Served as financial advisor to the Company
- Challenges:
- Family business needing larger platform to continue to compete with growing U.S. competitors
- Significant cultural differences with purchaser created many deal obstacles
- Outcome: In December 2012, Wolper Subscription Services, Inc. was sold to LM Information Delivery, a competitor of the Company, with headquarters in Finland.
Dever has been acquired by Von Allmen Capital Partners
Background: Headquartered in Easton, PA, Wolper is a full-service information management resource, providing customized solutions for subscription management and related resources including print and electronic, foreign and domestic magazine and journal subscriptions, as well as books and e-books, databases, site licenses, and state-of-the-art information management tools.
- Cassel Salpeter:
- Served as financial advisor to the Company
- Challenges:
- Family business needing larger platform to continue to compete with growing U.S. competitors
- Significant cultural differences with purchaser created many deal obstacles
- Outcome: In December 2012, Wolper Subscription Services, Inc. was sold to LM Information Delivery, a competitor of the Company, with headquarters in Finland.
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Avanti has been acquired by the Avanti Management Team and Gen Cap America
- Background: Headquartered in Miami, FL, Avanti is an innovative leader in the consumer appliances industry, targeting the niche compact home appliances sector and offering consumers a complete line of products, including microwaves, gas and electric ranges, dishwashers, portable laundry machines, water dispensers, upright and chest freezers, and compact and mini-kitchens.
- Cassel Salpeter:
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- Served as financial advisor to The Mackle Company, Inc. (owner of Avanti Products)
- Ran a competitive sales process, identifying and contacting over 80 financial parties
- Challenges:
- Achieve significant price for family owner, while transitioning Avanti management team to minority ownership with private equity partners
- Low growth business in a competitive space
- Outcome: In November 2012, Avanti was sold to the Avanti Management Team and Gen Cap America, Inc., a private equity firm based in Nashville, TN.
Business Owners Need to Move Beyond Uncertainty
By James Cassel
To view original article click here.
Companies have been known to postpone making major decisions as they wait to see what happens with elections and the economy.
For many middle-market business owners, the American Dream of selling their businesses for financial security or turning them over or selling them to their children before retiring seems more distant today than it did 20-plus years ago.
A recent study by The Wall Street Journal and Vistage International shows that almost half of the 799 small-business owners surveyed plan to retire after age 65, with 38 percent saying they plan to retire later than they expected five years ago. For some, it’s a matter of choice, for others, it’s simply not possible to give up the cash flow.
Whatever the case, many business owners today are locked in a state of “analysis-paralysis” — not making any major business decisions related to transitions as they wait to see what happens with the elections, the economy and their businesses. Why aren’t they looking to sell now? This is what we’re hearing:
Uncertainty about the future. Although the Federal Reserve has promised to stimulate the economy if it doesn’t show significant improvement, the inconsistency of the recovery, combined with uncertainty about key issues like the tax laws, has many business owners feeling skittish and opting to postpone transition plans. Although many think business is OK now, they feel they might get better valuations in the future as the economy improves.
Low expectations of returns on investments. Fact is, while 20 years ago you didn’t question a financial advisor who said that you could expect to average 10 percent per annum on your investments, today you don’t believe that same advisor who says you can get five or six percent return per annum over a 10-year period. The past 10 years have been flat. You cannot price a business based on the income you need to live on or replace your income with the proceeds of the sale. Often, the choice boils down to either having to sell for much less than you think you deserve or having to make the decision to continue running the business in an ownership position.
Income needed to survive. Many business owners don’t want to part with their businesses because they still need the income to fund their lifestyles. As I’ve mentioned, you will never be able to replace the income of your business with the proceeds of its sale. The fact that people are living longer these days — well into their 70s and 80s — is contributing to the trend as they simply have a different approach to life and need the money to continue to enjoy themselves.
Others think their businesses are doing well, and they feel no urgent need to sell at present. According to the Wall Street Journal and Vistage study, more than half those surveyed say the lion’s share of their net worth is wrapped up in their businesses, so they don’t think selling and retiring is in the cards any time soon, mainly because they will not have enough income. Instead of retiring, some are now considering hiring someone to operate their businesses for them so they can retain their current lifestyles and cash flow while relinquishing some of their responsibilities and freeing up more of their time. However, this has inherent risks. For starters, you’re putting your biggest asset in someone else’s hands.
In the old days, most people looked forward to retiring in their late 50s and enjoying the final chapters of their lives with the equivalent of 60 percent of their income upon retirement. These days, with most people living longer and enjoying healthier, more active lifestyles, they’re lucky if they can retire in their 60s or 70s, and they also need the equivalent of 100 percent of their current income upon retirement to continue living their current lifestyle.
What many business owners are failing to see, however, is the bigger picture. While we should always keep an eye on the specific political, economic and legislative issues of the day, we must maintain a close pulse on the potential threats and opportunities and be prepared to take action when needed. It’s also critical to continue to adhere to the basic principles of “good business” that are relevant no matter who is in office or what type of economic cycle we’re in.
History is ripe with examples of companies that suffered major losses because they didn’t take the right steps to identify potential issues and seize opportunities that came their way.
Look at what happened to Polaroid: There are no more Polaroid cameras. Blackberry is going through something similar now, and some say the company should have been sold a long time ago. Same may go for Yahoo!, which didn’t sell when it had the chance at what in hindsight looks like a very favorable price.
Furthermore, while most business owners will agree that losing their biggest client could be devastating, many don’t take the right steps to prepare for this. I know of a local business owner who turned down a significant offer from a potential buyer, only to regret it about six months later when he lost his biggest customer and eventually went out of business.
Another topic to consider: Is the industry consolidating? If so, survival could require becoming bigger. Sometimes, you only get one shot to sell to the consolidator — and if you don’t seize the opportunity, it’s gone forever. It can change the competitive landscape.
Without doubt, you must always be prepared to seize any strategic opportunities that come along. The following advice is always good to keep in mind:
Plan ahead: Work with qualified legal and financial advisors to develop appropriate written agreements, such as shareholder or partnership agreements that include succession plans and buy-sell provisions. That way, you’ll be more prepared to act quickly when the need arises. Too often, opportunities are missed and/or these matters end up in court because people failed to plan in advance.
Establish an effective board of directors: Appoint members with the right mix of experience, knowledge and contacts who can bring good value to your board and won’t be mere yes men. Particularly for family businesses, it’s always good to add independent members who can help handle the important, potentially divisive, decisions.
Build relationships: Don’t underestimate the power of relationships, introductions and good advice from those in the business, like lawyers and investment bankers.
Be realistic: Whether you’re thinking of buying, selling, or staying put, don’t make rash decisions. Be realistic about your business, the valuation of your company and the amount you seek. Also, be realistic about the timing, as it will take longer than you imagine.
Indeed, new threats and opportunities will always present themselves no matter what’s happening with politics, the law, or the economy — and often, it happens when it’s least expected. The current “analysis-paralysis” that many business owners are stuck in can be a dangerous proposition if they’re not ready to react when needed.
If you’re one of those businesspeople choosing to take the “wait and see” approach, remember that not making a major business decision is a major business decision.
James Cassel is co-founder and chairman of Cassel Salpeter & Co., LLC, an investment-banking firm with headquarters in Miami that works with middle-market companies. www.casselsalpeter.com
When Working with Relatives, Plan for the Unexpected
Family members can be great assets in a business, but to make it work, you need to face some harsh realities.
By James Cassel, Sept. 1, 2012.
Family owned businesses, when run correctly by the right family members, can be wildly successful. But when they’re dysfunctional, family businesses can be a real nightmare for everyone involved – and even destroy families and their financial well being.
There’s no question that our own flesh and blood can offer a level of loyalty, trust, commitment and vested interest in the business’ long-term success that’s not usually given by those who aren’t our family. On the flip side, things can quickly get ugly with family members who feel jealousy, resentment, entitlement, greed and other emotions that can get in the way of sound business judgment. When problems occur, the more family members involved, the worse things can get. Moreover, family businesses can also chase away great non-family talent if they are not sensitive to their needs.
While family owned businesses are the backbone of the U.S. economy, many family businesses fail or are sold before the next generation has taken the reins. I watched firsthand the third generation of two families kill a business. It could have been avoided if they had been more rational or had proper legal documents in place.
Having spent decades counseling owners of family businesses in all sorts of industries, not to mention having worked very successfully in several businesses with my own family members, including at Cassel Salpeter, I’ve pretty much seen it all. Here are a few important things I’ve learned that are critical for those who want to sustain healthy family owned businesses and healthy family relationships:
1. Plan ahead. Simply put, you have to put in place the equivalent of a “business pre-nup.” Work with qualified legal and financial advisors to develop appropriate written agreements such as shareholder or partnership agreements that include succession plans and buy-sell provisions. We all know couples that have built fabulous businesses together – only to see those businesses fall apart at tremendous financial and emotional expense when they divorce. Same goes for siblings who fight turf wars after the parent who owned the family business passes away or retires, and one sibling wants to run the business while the others want to sell or take out money. Too often, these matters end up in court because people failed to plan in advance. It’s important to have plans in place when dealing with family so everyone knows where they stand and agrees in advance to what can and cannot be done.
2. Communicate. In fact, over-communicate. Most families don’t do this very well or often enough. It becomes difficult to handle issues because the family members don’t know how to discuss their opinions, reach consensus and make decisions efficiently. So talk it out. Lack of communication is one of the main causes of litigation and failure in family businesses.
Need help? There are plenty of business psychologists and coaches who specialize in helping family businesses. Don’t wait until things go wrong to consult professionals.
Years ago, a couple contacted me for advice regarding their plans to sell their business. Although they had spent years grooming their very capable son to eventually take over the business and he was doing a great job, they decided to begin entertaining buyout offers without consulting him.
I reminded them that if they sold the business without their son’s involvement or consent, they might burn their relationship with him and his wife and never get to see their grandchildren. I recommended they discuss their plans upfront with their son, bring him into the process and, if they still wanted to sell the business, offer to sell it to him first rather than anyone else. A few weeks later, they sent me a bottle of champagne and a note that read: “Thank you. You saved our family and our business.”
3. Be picky. Recognize that not everyone is good for the business or should be in the business. Yes, even family members must understand that the “there’s always a place for you here” school of thought may not be in everyone’s best interest. Some companies are populated by next-generation members who failed in other businesses or spent the early part of their careers as aspiring athletes, artists, ormusicians before ascending to leadership positions as unprepared 40-somethings – clearly not a good business model. Finding the right positions for the right people is crucial. Not everyone is CEO material.
4. Implement safety measures. Require training and implement a screening process for new family hires and promotions. When possible, ensure that new family hires have obtained solid industry experience before they join the business. This will help ensure that only dedicated, qualified relatives join and lead the firm. I know families who “traded” their children to get experience at other businesses before the children joined their own families’ businesses.
Additionally, some family run businesses appoint independent members to the board of directors along with family members and/or a family council, which functions like a board of directors and handles the important, potentially divisive decisions. Some have lawyers develop proper succession plans for use after retirement, death or disability. Measures like these can help prevent many of the common headaches that occur when it comes time for the second or third generations to take the reins.
5. Think creatively. Many family businesses are run for decades by the same leaders, often making it difficult to implement creative solutions or necessary changes like new technologies, business models and schools of thought. Don’t let this be the case for you. Young family members may have great ideas.
Years ago, I watched a business owner successfully devise a clever escape route from a touchy family situation. One sibling had taken over the family business and grown it to unprecedented levels. Thinking they needed extra support after sales skyrocketed, they invited another sibling to assume a leadership role. They soon learned this was a big mistake, as everything this new sibling touched turned to ashes. Rather than cause more turmoil by booting out the problem child, they offered to double his salary in exchange for staying home. He wisely accepted, and the business got back on track.
Most important, don’t be afraid to say “no” or terminate problematic or unhappy family members. No matter how tricky or delicate the situation might seem, it can be in everyone’s best interest. Having done this personally, I can tell you firsthand how hard it can be. Many family businesses suffer unnecessarily because they over-extend their resources to accommodate every family member who wants a piece of the pie. By putting the right systems in place, you can minimize the potential for trouble and maximize the potential for success while retaining everyone’s priceless peace of mind.
James Cassel is co-founder and chairman of Cassel Salpeter & Co., LLC, an investment-banking firm with headquarters in Miami that works with middle-market companies.
