Are you afraid that your family business will be taken from you if you partner with private equity? Mark Schmucker is the fourth generation leader of Schmucker and was recently in Toronto giving a presentation about how the family business mystique pays off in sales.Mark showed advertisements from the 1960's which could play today just as successfully with their emphasis on family living, green lawns and a plate of jam sandwiches.
Mark says that in the early 90's, during the big market downturn, his father and uncle made the decision to bring in private equity partners. At the time, the Schmucker business was not doing well and there were family issues too.
With the help of partners (not just lenders) who put in cash but also brought a great deal more, Schmuckers began their growth tract by starting off buying Jiffy peanut butter. Mark says at first the family thought the spread into breakfast foods seemed too ambitious and peanut butter seemed crazy, but today they are happy because they own 8% of a billion dollar company, fifth in their industry.
Not bad.
Jacoline Loewen's book, Money Magnet: Attracting Investors to Your Business, goes through this challenge for business owners to decide if they want to be in control or get wealthy - lifestyle or legacy. Schmuckers chose to go with "get wealthy" and found out what thousands of family businesses have learnt: giving up some of the company to private equity partners results in a lot larger amount of money.
John Loewen says, "bringing in private equity partners to a family business is probably the smartest plan if owners want to pass along the wealth of the business to future generations. Like Mark Schmucker, you do not need to won 51% to have control of the company and private equity gets the mystique of family businesses."
