Reinventing the Family Firm - Chapter 1

DEFINING THE FAMILY BUSINESS PORTFOLIO FIRM

SUI As already alluded to, selling one’s legacy family business, which is frequently an emotionally difficult process, might be made somewhat easier by considering the following three-step sequence: ♦ Step 1: Sell the “hardware,” such as one’s fleet of ships or factory. ♦ Step 2: Sell the “software,” i.e. the organization, including operating procedures and files, as well as organizing job transfers for the people employed by the firm. It is particularly critical that all, or at least most, of the key managers agree to continue in their positions after the sale. However, many key managers may have developed particular loyalties to the owning family on the seller side, and therefore might prefer to leave. In these circumstances, it can be difficult to sell an organization with most of its key people in place, allowing the organization to continue to function in a practical way. ♦ Step 3: Sell the legacy company’s name – which, by the way, might often incorporate the name of the owning family, making this a particularly emotional step! In the case of the sale of S. Ugelstad’s legacy ship-owning assets, we sold the “hardware” and the “software” (steps 1 and 2) but not the name (step 3). This facilitated the repositioning of the firm to eventually become the family business portfolio firm SUI. SUI in its current format was established following the sale of the heritage ship- owning business. The “portfolio” of SUI consisted of the combination of three types of ownership, varying in risk profile, in various national settings, and held in SUI versus by the owner personally. This pattern seems to be quite a typical situation for many family business portfolios: in particular, that an over-reaching logical unifying legal ownership structure is lacking. As noted, SUI is active within five business areas (stocks/bonds, real estate, shipping, ventures, education), with ownership at present in some 35 business entities. There were perhaps as many as nine important considerations that played a role when it came to the decisions that eventually led to the present portfolio structure: ♦ A desire to spread the risk has been key. In consultation with the family, the decision was taken to retain approximately half the assets as “next generation money,” i.e. at relatively low risk. This part of the assets would thus be more easily preserved for generations to come.

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