When Charlie reached the breaking point and decided that Alan had to leave the business, it created a contentious situation that threatened to tear the family apart. The brothers had a buy/sell agreement that stated that Charlie would have paid Alan just under $10 million for his share of the business. Alan wanted more than the buy/sell would give him. He hired an adversarial lawyer who worked on a contingency and promised Alan he could “get a lot more.“
I worked as an advisor with the Yosts to help them make their way through this buy/sell agreement. In my meetings with the Yosts, I discovered that one of the most important core values of the family was their commitment to function from a place of integrity. This principle was demonstrated by the actions of the brothers’ grandfather, business founder Fred Yost.
Integrity: Firm adherence to a code of especially moral values, incorruptibility.
Alan had a wonderful, loving relationship with his grandfather. During Fred’s latter years, he and Alan had lunch once a week. In those lunch meetings, Fred told Alan the stories that only a founder of a business can tell. Those stories all contained a moral: do business with integrity.
I had the notion that if I could appeal to Alan’s respect for his grandfather and his grandfather’s commitment to doing business with integrity, I could help them avoid a break up in the family.
The Yosts worked with a financial consultant who had been an advisor to the family for many years and who was trusted by the family. I proposed that Alan and Charlie engage the financial consultant to come up with a recommendation — what I called the “Elegant Agreement“ — that would be the basis of the buy-out, rather than the buy/sell agreement that was in place.
For me, an Elegant Agreement is one that is grounded in integrity. It has been said, “Take the high road through life. The view is better and it’s less crowded.“ This means doing what is right rather than just being greedy and going for all you can get.
Here is the Elegant Agreement that provided the Yost Brothers’ with guiding principles for their settlement:
Schedule of events leading to closing. {This assures an ending to the transaction.}
Had these brothers gone to court, it would have ended any relationship between their respective families, and their parents would mourn the break up of the family for the rest of their years.
In their use of the “Elegant Agreement,“ Alan and Charlie took the high road in the transaction. Alan received a premium of about 10%. Charlie was happy that he had complete control of the business, to do as he thought was right. Further, he now has 100% of the upside of the business and is in a position to receive the full benefits of his efforts.
The Elegant Agreement was a win-win for everyone and preserved the family’s relationships. Is the “high road“ something that would be a good thing for your family business?
Family Business Matters has extensive experience assisting family businesses. With many decades of experience, we understand the wide variety of challenges that families face as they work together to build, grow and sustain a thriving family business generation after generation. Through conferences, continuing education programs, family business retreats, speaking engagements and private family business consulting services, Family Business Matters has assisted more than 450 family-owned businesses around the world chart their way through family business issues of all shapes and sizes.
For more information on how Family Business Matters can help your family business survive and thrive, please contact us today at (970) 948-5077.
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