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Recently, a company in the music catalog business was referred to me for possible corporate legal services involving the potential sale of the company. The company owns the copyrights to the cataloged compositions and licenses the compositions to various end users.

The accountant who referred the potential client for legal services indicated that the 50-year old company’s revenues had been off for a few years. The company’s founding father, Chief Executive Officer and sole owner was frustrated by the constant fighting between his two sons, one in his late 40’s and the other in his early 50’s, who were key managers of the company. As a result of this constant friction and the toll it was taking on the founder and members of his family, the founding father was considering selling the company. He was reluctant to do so because it provided livelihoods for his wife and him, and their two sons and their families, including a 25-year old grandson who was an employee of the company.

During the course of a telephone conversation with the father, it became clear that many potential issues were in play, some legal and some non-legal. I recommended that, rather than simply addressing the issue of a potential sale of the business, the father, his wife, the two sons and the grandson meet with me and my family business consulting partner, Dr. Robert Lorber, an organizational psychologist. The meeting would allow everyone to get to know one another and get a sense of the chemistry between the family and our consulting team. Furthermore, the meeting would provide my partner and me with an opportunity to obtain the family members’ respective vantage points regarding what was going on with the business and those key family members involved with the business.

The initial meeting revealed a substantial amount of information that was not apparent from my telephone conversation with the founding father.  The father was, in fact, disturbed by the constant battles between the sons over what he believed to be differences in approach to the operation of the business. However, the sons were enormously frustrated over their 72-year old father’s refusal to surrender any control over the ownership and operation of the company, or to even clearly differentiate their respective duties and responsibilities.  Even the grandson, who had a graduate degree in computer science, was showing concern over the company’s failure to update its operations, marketing and sales and use technology to its benefit.  All family members, including the founder’s wife, were concerned that the father had never put in place any plans for slowing down and retiring, or for who would succeed him in running the operation.

Toward the end of the initial meeting, Dr. Lorber and I, along with the key family members involved in the business, agreed that they would like to consult with us on several important, overlapping topics, including: (i) issues pertaining to the business and its current model; (ii) issues pertaining to the ownership and governance of the business; and (iii) issues pertaining to the “family system” and the way in which it affected the conduct of the company and maintenance of family relationships.

It was agreed among all parties that the core objectives of the consulting were to: (a) provide the family and its management team members with a road map of the “real”, as opposed to “perceived”, issues affecting the business and the family members actively involved with its operation, and (ii) assist the family in coming up with a plan of action that would address the concerns and needs of the business and the family members actively involved with the business.

The real benefit of the above process is to provide the company and the family with an array of possible courses of action that would not limit their choices to immediate sale or breakup of the business.

After providing feedback and a plan of action, Dr. Lorber and I indicated that we would discuss with the family members directly impacted by the business whether they felt comfortable implementing the plan of action themselves, or whether they might desire our input and assistance for some period of time in putting the required changes in place.

In summary, key to the family business consulting process is assisting the family members involved with the business in identifying “actual”, rather than “perceived,” problems facing the business and family, and putting systems in place to build a more cohesive team, improve communications, problem solving, dispute resolution and decision-making, as well as short and long term planning and implementation.
 

 

Joel Fishman has worked almost four decades as a business lawyer and mediator of business disputes. Representing large, middle market, and entrepreneurial businesses in a broad range of industries including entertainment, communications, new media, and technology, Fishman represents clients in the formation, financing, operation, and expansion of businesses, as well as with the leasing, purchase, development, financing, and sale of all types of real estate. Fishman is active in the Southern California community, and he frequently writes for the Los Angeles Daily Journal on mediation as well as corporate and real estate legal topics.