Estudio Nunes & Asoc., member of Alliott Group is proud to announce the expansion of its services.

Many of our clients constantly struggle with generational transfer models and require assistance to manage their familiar companies successfully. We closed an association with Consultant Dr. Leonardo Glikin, a renowned professional in organizational coaching and Company Protocols. 

We share an article written by our new Consultant, which we think that describes accurately the problems and solutions that we can bring to the table.

 

Generational transfer models in family businesses

Although each family and each business are unique, we have identified five different models of generational transfer.

Those models are useful for advisors to help family business owners in those critical stages in the life of a family business. 

Understanding the conditions for the operation of each model, its benefits and potential risks, allow the advisors to provide each family and each business with the most effective tools so they can go through the complex generational transfer process. 

We call those models: 

  • Integrative
  • Representative
  • Selective
  • Re-foundational
  • Transactional.

We will describe each model in the following paragraphs:

1.- Integrative model

All children must be heirs of capital, no matter if they work in the family business, or if they are managers, or those who run the Company, or they have no involvement at all. 

This model reflects the vision of creating a family business that go from generation to generation, and that continues to grow as an economic family group, reinvesting its surplus for the expansion of its current business or other foundation of new endeavors. 

2.- Representative model

This model is usually introduced, as an evolution of the integrative model. When the second or third generation plans to integrate their children, giving prevalence to corporate participation, since shareholders do not directly participate in an assembly to defend their interests, but instead must be appointed by members of his family lineage to perform that function, or it must be delegated to another person, generally a professional in the field of business. 

3.- Selective model

In this model, the current owner chooses his or her successor, perhaps only one of the children, who is trained to run the business, while the other children do not work with the founder. 

In this model, the Company’s survival is not the result of the desire and the action of the whole family, but the consequence of the engagement and the effort of one or a little group of them, specially selected by the precedent leader. 

4.- Re- foundational model

This model is not product of the desire and decision of the older generation, but a consequence of something out of order: the premature death of the Founder, or bankruptcy, or other contingencies that impede the Founder to run the Company. 

One of the children, who fights to save the Company, claims for recognition and compensation after he or she succeeds. 

But, perhaps, the other family members do not share the viuw that the Company wa saved, or had an extraordinary growth, due to the contribution of a special family member.  

Therefore, this model is often a source of conflict. 

5.- Transactional model 

The older generation sells the Company to some members of the new generation, who pay, maybe in cash, or, generally, though the years that the Founder and his spouse is alive. 

The seller is seeking for economic tranquility, and the belief that the buyers commitment will guarantee a dedicated and responsible management. 

 

Conclusions

Each generational transfer model brings about particular consequences. 

Understanding the reasons for each decision, and advising about the results, is a valuable service from advisors to business families. 

 

About the author

Leonardo J. Glikin is an argentine attorney, consagrated to family business consultancy, key speaker, university professor and author of several books about the subject, such as To Think about the Estate, Matrimony and Patrimony, Siblings in Family Business, Exiting, the art of leaving business and staying alive, The spaces of women in family business.