The popular HBO show Succession successfully dramatized something that family business owners know well: the challenging task of making sure their exit from a business that they have tended to for many decades goes smoothly.
And while the HBO series is highly dramatic, one thing it does realistically portray is how frequently succession planning is overlooked until the last minute, when options dwindle and the prospects of a smooth transition dim.
Succession planning in 2023 involves multiple steps and sometimes incorporates outside input from private equity firms and/or executive recruiters.
Read on for a basic overview of how to get succession planning right.
Planning, Communication and Transparency are Key to Succession Planning
To get started, you’ll want to:
- Define the objectives of the succession plan. This could include preserving family values, maintaining business continuity, and ensuring financial security for both the retiring generation and the successors.
- Identify and assess potential successors, including potential family members who have the skills, experience, and interest in taking on leadership roles within the business.
- Address financial aspects of the transition, including determining how ownership shares will be transferred and financed, as well as estate planning to minimize tax liabilities and protect family wealth.
- Create a timeline for the transition process. This should include key milestones, such as when leadership roles will be transferred, when ownership shares will change hands, and when the retiring generation will step back.
The Role of Private Equity in Succession Planning
Could private equity involvement make sense in your succession plan? Here are some reasons why some family firms consider working with a private equity firm:
- Business Valuation: Private equity can assist in determining the value of the business, establishing a fair price for the outgoing generation’s shares and to ensure proper financial planning for the incoming generation.
- Professional management: Private equity firms often bring in experienced managers and professionals to help run the business. This can alleviate concerns about the competence of family members who may be taking over leadership roles.
- Expansion and scaling: Private equity firms often focus on scaling and expanding the business, which can be beneficial for the family’s legacy and the company’s long-term growth prospects.
- Transparency of Operations: Private Equity may also introduce corporate governance practices to enhance the business’s operations, transparency, and accountability.
- Timeline: Private equity firms typically have a defined investment horizon, often around five to seven years. This can serve as a structured timeline for the family to transition leadership and ownership to the next generation or other stakeholders.
Ultimately, you should assess whether the private equity firm’s goals and strategies align with your own and whether the partnership will help achieve the desired succession outcomes. Additionally, clear communication and a well-structured agreement are essential to ensure a successful collaboration between a family operation and the private equity firm.
The Role of Executive Recruiters in Succession Planning
Here at ACCUR Recruiting services we have assisted in succession planning in a variety of ways, with hiring solutions targeted toward a given companies size or ultimate goals. Examples include:
- Working with a family business to find qualified successors who align with the original vision and mission of the organization.
- Working with private equity on rapid turnaround or rapid exit scenarios via CEO or other C-suite candidates with a highly specialized profile.
Some reasons why you might consider working with an executive recruiter on your family business:
- Talent selection: Executive recruiters specialize in talent acquisition and have extensive networks. They can help identify and assess potential successors both within and outside the organization.
- Objective assessment: While conducting thorough assessments, including interviews, reference checks, and skill assessments, to gauge candidates’ suitability, executive recruiters can also give you a high level “gut check” on your succession plan in regards to talent acquisition.
- Candidate Development: In cases where internal candidates are identified as potential successors, recruiters can offer coaching and development programs to help them prepare for leadership roles.
- Customized Solutions: Recruiters can tailor their services to meet the specific needs and goals of the organization, ensuring that the succession plan aligns with the company’s unique circumstances and culture.
Need More Help with Your Succession Planning?
Contact us and we’ll help you craft a tailored plan.
Edouard Thoumyre is a seasoned executive recruiter with over 17 years of experience in executive search, as the Founder and Managing Partner of ACCUR Recruiting Services. Specializing in the Consumer and Luxury Goods industries, he has a proven track record of placing senior level and C-level executives in family, private equity-backed, and Fortune 500 companies in the beauty, wine & spirits, watch & jewelry, home goods, and tobacco industries, among others. Edouard Thoumyre holds a master’s degree in Entrepreneurship from HEC Paris (#1 European Business School, Financial Times rankings) and a master’s degree in industrial engineering from Centrale Lille (a top 10 French engineering school). ACCUR Recruiting Services has been recognized as a Forbes Top 100 executive search firm since 2018.
Edouard Thoumyre and his firm, ACCUR Recruiting Services, have been featured in numerous publications such as WWD, Business Insider, Newsweek, CPG Specialist, Yahoo Finance, Nasdaq.com, Marketplace by NPR, Business of Fashion…