Retail Chain Shareholder

Client

Our client was an aging 50% shareholder in a profitable retail/wholesale chain in eastern Massachusetts.

Situation

Our client wanted to sell or wind-up the business.  The other shareholding family wished to continue the business because it continued to be profitable.  The two sides, although related, saw rising tension as they could not resolve this conflict.  Litigation looked highly likely if not inevitable.

Solution

We sat down with our client to discuss not only the business as a whole but also the desire to exit from the business as the principals aged.  By listening closely to the client, we learned that an immediate exit was not actually what he wanted.  Rather he wanted an orderly wind-down of the business and its various assets over time that could maximize the sales price of the several pieces.  No one in the next generation of the two families wanted to stay in the business even though many were currently employed at the company.  Appreciating this dynamic in which familial, emotional, and aging issues all played an interwoven role, we devised a strategy to avoid litigation.  We met with the other 50% shareholder to see if we could build a consensus.

The other 50% shareholder appreciated all of the same issues but just had different emphasis.  His position was, if we can’t sell the business in the short-term, let’s just keep operating it.  Each major shareholder was, however, over sixty and appreciated that the status quo could not continue.  Through calm and thoughtful discussions with the principals, their respective children, and counsel, we explored how similar their respective views were rather than emphasizing the dissimilarity in their respective timelines for disposing of the business.  In such a situation, litigation made no practical sense. 

We began to outline a potential agreement on the need to wind down the affairs of the company over time, market the assets, including real estate, and how to conduct the affairs of the business during an extended wind down.  During the parties’ negotiations, we discussed simple and innovative ways of resolving conflicts that arose, using the residual good will that each “side” had towards the other.  Eventually, the parties struck an agreement on the gradual sale of the enterprise over four years and how the business was to be conducted in the interim.  The discussions had been undertaken without serious rancor.  As a result, the opposing shareholder asked YSR to represent the entity in discrete matters during the wind-down phase, which we did.

Result

Several years later, after the agreement was extended briefly, the business was fully sold, the proceeds fully distributed, and the principals satisfied that a potentially contentious disagreement and litigation had been avoided.  By listening to the client and with our knowledge of family businesses, we were able to preserve the family bonds while getting all involved to move in the direction they knew they had to head.  In some situations, litigation is definitely not the answer.