Financial Advisory

Investment Banking

Private Equity

Fall 2012

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de Visscher & Co. Realigns its Businesses

The Financial Crisis of the last four years has had a significant impact on the capitalization strategy of

family and closely-held businesses. Public markets have become increasingly inhospitable for family businesses due to market volatility, increased regulations and excessive disclosure requirements. At the same time, both large and small family businesses can no longer rely on global financial institutions or institutional private equity funds as reliable sources of patient capital. The shorter term nature of institutional capital can result in a lack of alignment for family businesses seeking long-term value added capital partners, not just capital sources.

de Visscher & Co. recognized those changes early in the Crisis and in 2009 formed Family Capital Partners as a conduit of patient capital from single family offices to invest in family companies. The notion of forming partnerships of capital and values between single family offices and owners of family businesses has quickly gained momentum. Families Investing In Families™ - as Family Capital Partners is known - currently comprises a network of over 300 single family offices around the world and has been instrumental in handling half a dozen patient capital partnerships over the last two and a half years.

Family Capital Partners is highly complementary to our existing Family Business Consulting and Investment Banking Services, positioning de Visscher & Co. at the forefront of capital market services for upper-middle market family businesses and single family offices. With over 25 years of experience in advising and consulting with single family offices and family companies, our team continues to strive at uncovering shareholders’ objectives, analyzing and valuing their business holdings, developing and implementing a variety of capital, liquidity and governance options and assisting the family in its trans-generational wealth planning strategy. Needless to say, our family business consulting and investment banking skills have been instrumental in the success of Family Capital Partners.

Another result of the Crisis is the increased competition and need for greater specialization of investment banking services. Recognizing this need, Jim Murphy, who has been a partner at de Visscher & Co for two decades, founded Belden Hill Partners to provide investment banking services to mid-sized and closely-held businesses.

de Visscher & Co. and Belden Hill Partners will continue to collaborate on a multitude of assignments where both our teams add value to better service our middle market family clients.

de Visscher & Co. recently advised Olympia Chimney Supply, Inc. ("Olympia") in a long-term recapitalization with Argosy Capital and M&T Bank.

Olympia Founder and President Will Kozlansky said,

"The team at de Visscher & Co. proved invaluable throughout this transition process for Olympia and our management team. de Visscher & Co. conducted a seamless and efficient process to meet our goals of identifying a long-term, patient capital partner that is as equally dedicated to the growth of Olympia Chimney. As President, I am thrilled to begin our new partnership with Argosy Capital, and I am excited to work with them and to continue building a great organization and serving as a value-added resource for our customers for years to come."

de Visscher & Co.

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When the Family Firm Institute convenes October 17 in Brussels for its annual global conference, attendees will

be welcomed by François de Visccher, program chair for this event. More than 300 attendees from around the world will hear keynote presentations by Rene Boender, Belgian futurist, Julie Macintosh, author of Dethroning the King, and Grammy-award winning composer Eric Whitacre, who will speak on “Intuition as a Creative Force.”

More than 30 outstanding educational sessions presented by family business and family wealth experts worldwide, addressing the conference theme of Family Enterprise: The Field, The Families, The Future, will be included. Opportunities for networking, meeting old friends and finding new colleagues will be provided at the Radisson Blu (conference hotel at the Grand Place), the Belgian Beer Museum and Musee Magritte.

Colleagues Albert Jan Thomassen and Jozef Lievens are chairing the Research & Education Symposium and the European Advisory Committee, respectively.

de Visscher has long been active in FFI, serving as treasurer and president. FFI is the leading membership association

Australian Fully Integrated Family Business advisory firm, FINH, and

de Visscher & Co. have announced an alliance to offer Australian and Southeast Asian family businesses access to patient capital from international private capital sources and family offices.

FINH is a Fully Integrated Family Business advisory firm dealing exclusively with multi-generational family owned and operated businesses in Australia and Southeast Asia. Through 30 years of industry experience FINH’s mission is to support its client’s success from generation to generation. The organization specializes in integrating the family and business affairs of typically multi-generation privately-owned businesses and those with a vision of becoming this.

David Harland, FINH’s Managing Director said, “We are delighted to be able to offer our Australian and Asian clients the financing options and capital-raising experience of de Visscher & Co. We believe the partnership offers investors access to the vibrant Australian market while increasing financing options for growing family businesses. de Visscher & Co. understands the

worldwide for professionals serving the family enterprise field. It provides a global forum for practitioners, academics and others to acquire multidisciplinary knowledge while engaging in collaborative opportunities. Through its international journal, certificate programs, Global Education Network (GEN), and its preeminent international conference, FFI upholds the highest standards in best practices. Its mission is to be the trusted resource, advancing the field of family enterprise.

challenges of balancing the capital, liquidity and control needs of a family enterprise. As partners we appreciate that successful multi-generational families-in-business pursue sustainable growth strategies for the business while also nurturing the family's patient capital”

“The alliance with FINH will provide our network of family offices and family businesses access to investment and partnership opportunities with the growing population of highly successful Asian Pacific families. We are excited about the partnership with FINH as we develop together global alliances among families”, says François de Visscher.

Contact Kim Harland: +61 7 3229 7333FINH - Brisbane OfficeLevel 6/410 Queen StreetBrisbane QLD 4000www.finh.com

François de Visscher chairs program committee for FFI global conference in Brussels

de Visscher & Co. and FINH Alliance Brings Patient Family Capital Options to Australian and Asian Family BusinessesBrisbane, QLD 17 July 2012

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Family businesses have the unique opportunity to nurture a distinctive legacy that is often impossible to replicate in

a public company setting. The defining stamp of “how we do business” is a hard-earned privilege of the privately-held enterprise; a deserving reward for successfully navigating the risky minefields of a competitive landscape, for surviving a cutthroat industry against the odds, for playing and winning against the big boys.

The cultural expressions of the family business can play out in a variety of ways: extreme generosity with philanthropic giving, for example; or fierce loyalty to employees. A quirkier business might encourage employees to bring their pet dogs to the office, or to leave work early on Friday afternoons during July and August, “so that we can all enjoy our nice long summer weekends” (my employer circa 1995). Or how about the over-enthusiastic CEO who arrives at the Holiday party each year dressed in a superhero costume? The point is, it’s your family’s business, darn it, and as long as you continue to haul in the profits, you should be able to run it as you see fit.

These idiosyncratic and unorthodox practices are often the very thing that makes a business successful to begin with (just look at the online shoe company, Zappos), creating a fervent loyalty among the ranks, or the ability to be unusually nimble and flexible with customers. The “family-ness” factor of a business is a huge competitive advantage.

Until it’s not.

Unfortunately, the ever-changing economic and market conditions will ultimately force every business, large and small, to eventually come face to face with the limits of their capabilities. Usually this takes the form of a crossroads, where the old formula for success doesn’t work as well as it used to.

Sometimes it is a result of internal factors, such as outgrowing your existing infrastructure or talent: will the people who brought you to the $50 million level be the same ones who will grow your business to the $250 million mark? Probably not. In other cases the changes that shake up a business come from external forces, such as the introduction of new innovations, the commoditization of your product or services, or competitors with deeper pockets charging into your market. Any or all of these can throw a wrench into the momentum of a once-stable business situation, casting fresh doubts on the future.

These tectonic disturbances may be the impetus to cause a careful re-thinking of the family’s approach to leadership and decision-making, shifting from a “family business” to a “business family” mindset. It may look subtle on paper, but the implications of the two diverging approaches are profound. Here’s the difference: A family business is driven by family loyalty and harmony, making choices that often trump profitability and performance, even to the detriment of the business’s long-term viability. A business family, on the other hand, recognizes performance and competitive profitability as the main thing that will provide long-term sustainability,

outweighing family loyalty considerations, thus becoming the primary criteria for decision-making.

It is here, at this crossroads, where you will often find family business executives thinking the unthinkable: is it time to bring in outside leadership? Although some might view this as admitting defeat, the introduction of non-family executives into an organization during critical transition points can be the smartest move for ensuring long-term survival.

There are some very good reasons for family businesses to bring in outside non-family leaders. Creating greater clarity and focus to future planning, for instance. Or poaching leadership experience from an organization that has already successfully overcome the challenges you are currently embroiled in. Bringing fresh, objective thinking to the organization can be a breath of fresh air; a necessary catalyst to jump-start the business to its next level of growth and profitability.

But – and here’s the stickler –it’s also risky. Let’s be honest: after running the show for so long, do you really want some hot shot from God-knows-where pushing new ideas around that aren’t necessarily your ideas? Plus, this executive – this outsider -- now has front row access to the inner workings of your family business, warts and all. Perhaps some things are better left private. Worse yet, what if some people actually like this outsider, and start to buddy up with him? The new leader may cause splits and create divided loyalty camps. Why bother disrupting the peace and tranquility of the functional family dynamics?

Despite the risks, there are tremendous benefits to bringing in an outside leader. But the better prepared you are ahead of time, the more successful you will be in integrating top talent into your organization while avoiding the prospective drama altogether.

Do This FirstRealistically, there are several precautions a family business should take when considering an outside executive prior to inviting them to join the ranks.

1. Be overly explicit in defining decision-making scope and authorityA new executive will most likely mix things up among the current cast of characters at the top. If he or she is worth their salt, they will be very comfortable taking decisive charge of their area. This authoritative stance may fly in the face of current management dynamics. Many family businesses have evolved over time towards an approach of wearing many different hats, where various family members are comfortable getting involved in many different facets of business decisions, maintaining fuzzy lines between functional management.

In order to roll out your new executive’s position without a hitch, everyone, and I mean everyone, must have a clear picture of what exactly the scope of their purview looks like.

Four Things You Should do before Hiring a Non-Family ExecutiveBy James B. Wood and David Budnick

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de Visscher & Co.

de Visscher & Co. is an independent financial advisor to business owning families and closely held businesses operating worldwide for over 25 years, primarily in the United States, Canada, Europe, the Middle East and Latin America.

Since its inception in 1990, they have advised, one of the world’s leading independent financial consulting and investment banking firms for family and closely-held companies. Over the last 20 years, they have advised over 300 family companies and family offices worldwide on issues of liquidity of shareholders capital needs of their business and family governance. In 1998, de Visscher & Co. founded “Family

Capital Growth Partners”, a private equity fund focused on making equity investments in family-owned and closely held companies experiencing the growing desire of Single Family Offices for direct co-investments. In 2010 de Visscher & Co. developed “Family Capital

Partners” as a network of Single Family Offices to make direct co-investments with other families. “Families Investing in Families”.

Contact: de Visscher & Co., Two Greenwich Office Park, Greenwich, CT 06831 Tel: 203-629-6500François de Visscher e-mail: francois@devisscher.com

Family Firm Institute ConferenceBrussels, Belgium

October 17 - 20, 2012www.ffi.org

European Family Office ConferenceLondon, UK

November 6 - 9, 2012www.campdenconferences.com

Family Firm Institute ConferenceFamily Firm Institute ConferenceBrussels, BelgiumBrussels, Belgium

October 17 - 20, 2012October 17 - 20, 2012www.ffi.orgwww.ffi.org

European Family Office ConferenceEuropean Family Office ConferenceLondon, UKLondon, UK

November 6 - 9, 2012November 6 - 9, 2012www.campdenconferences.comwww.campdenconferences.com

de Visscher & Co.’s Upcoming Speaking Engagements and Conferences

The more direct and explicit you can be in defining the role, key responsibilities, scope of authority, who reports to whom, the better. Not that you necessarily throw out collaboration, but understand that now things will be different.

2. Get the other family members on board. It is important to have a critical mass of support so that the active family members share in the vision of the new leader’s role. The most frustrating thing for a new executive is to be caught in an ambiguous cross-fire between legacy family members and the job she thought she was given to do. If Bob has always been the go-to person for capital spending decisions, will he now be expected to defer to the new leader? Will he go behind her back if he doesn’t agree with a decision, or can he comfortably let go? Beware of back-door runarounds, dart-throwing and good old-fashioned sabotage when new leadership blood enters the scene. If not dealt with up-front, a contingency group may emerge with a subversive desire to submarine the new world order. “See? I told you it was a bad idea,” they’ll say after going behind the new leader’s back for the 14th time to undo their decisions.

Snuff out the detractors early on. Gain full commitment from each and every family member regarding the new executive to let them do their job. Sign a pact if you must.

3. Expose the Sacred CowsWe were recently speaking with a non-family CFO who confided that he was struggling to come to terms with his new employer who was going to great lengths to “accommodate” less-than-effective family members by paying them six-figure salaries to stay away from the business. This made no sense at all to the CFO, who hailed from a typical performance-based corporate background. If someone is not performing effectively, why not just cut the strings and let them go? The answer from the 3rd-generation family members running the company was, of course, “None of your business.” They saw things differently.

This type of “slush funding” is not limited, of course, to employing stray cousins. The hot spots could be creative outlets such as pet projects, equipment, or unprofitable lines of business. More typical are loose expense accounts, cars, boats, vacation homes, hunting lodges, all of which pass through the company’s books. As we said earlier, it’s your company, and you can pretty much do what you want with it (within legal and ethical bounds, of course). But don’t expect an outside executive from the corporate world to unwittingly accept them without question.

Instead of hiding it until the truth is discovered on the sly, bring these things out into the open and discuss the specifics about what is untouchable – regardless of whether it makes business sense or not – and what is up for discussion. It will be much more palatable for the outside executive to swallow the slush if there is awareness and a respectful acceptance from the get-go.

4. Identify the non-negotiable Cultural ValuesIs your company team-based and collaborative, or do you run an aggressive command-and-control environment? Are you tight with the pennies, or is it okay to book a room at the Four Seasons once in a while when on the road? Cultural values are generally defined as the unwritten rules of behavior, and preserving these values is critical to the life blood of the privately held business. In fact, cultural values often outweigh the skill level of an outside executive, in that it is more important for family members to find someone they can trust and align with as a “fit,” rather than simply bringing on a hired gun who will wreak havoc while getting the job done.

The problem with culture, though, is you can’t always put your finger on it. That is, until you notice someone scraping up against it in the wrong way - then it becomes all too clear. Don’t wait for the new executive to figure it out for himself (or through the scandal of breaking the unwritten rules). Do yourselves both a favor and identify the few non-negotiable cultural values before you begin the hiring process. Then use them as an interview guide, a reference check, and as your hiring criteria.

Paving the WayThe decision to bring a non-family executive into the family business is a serious decision, not just for the family, but also for the executive who will be joining your organization. Remember, this is not just about you and your business, but it also about the livelihood of a talented business person who is putting a great deal of trust in your promises when considering a role with your family enterprise. The credibility must be mutual between both parties, with a clear view of the job scope, the limitations, and knowing who’s got your back when the rubber meets the road.

James B. Wood is Chief Strategy Officer of Clemens Family Corporation, a 4th-generation $700 million agribusiness and real estate company with over 200 family shareholders. He is author of the book, “The Next Level: Essential Strategies for Breakthrough Growth” (Perseus Press). Email: jwood@clemensfamilycorp.com

David Budnick is Chief Financial Officer of Clemens Family Corporation, and was formerly with Price Waterhouse Coopers. Email: daveb@clemensfamilycorp.com

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