M&A advisory for family businesses

Selling the company, bringing in an investor or preparing succession are decisions that often arise together in a business family. While some shareholders want to remain at the head of the business, others may seek liquidity or reduce their wealth concentration. M&A advisory helps assess these alternatives and structure a transaction consistent with the shareholders’ objectives.

For that reason, M&A advisory for family businesses requires an approach that combines financial analysis, market knowledge and the sensitivity to understand the objectives of different shareholders. Before approaching buyers or investors, the family must define what it intends to preserve, transform or realise through the transaction.

What makes an M&A deal different in a family business

In family businesses, three dimensions overlap: family, ownership and management. The same person may be a shareholder, a family member and an executive at the same time. That overlap makes certain decisions more complex.

The Brazilian Institute of Corporate Governance (IBGC) highlights the interdependence between the family, ownership and business spheres. In practice, a transaction that suits the company may produce different effects for each shareholder and for each generation of the family.

Questions that usually arise before a transaction include: do all shareholders want to sell? Does the family intend to step away from management or stay involved? Is there a successor who is prepared and willing to lead the company? Are some shareholders seeking liquidity while others want to remain? Does the business need capital to grow? Is the priority to preserve control, bring in a partner or complete a full sale?

These answers shape the structure of the transaction, the profile of potential investors and the terms to be negotiated.

Succession and selling the company are not the same decision

The absence of a successor does not necessarily lead to a full sale. Likewise, having a new generation interested in the business does not prevent an investor from coming in.

Succession may involve transferring management to family members, hiring professional executives or combining both. Ownership succession concerns the transfer of property and may follow a different timeline. The IBGC notes that succession should be understood as a process of preparing the family, the ownership and the management, not simply replacing whoever holds the executive lead.

The family may consider a full sale, a sale of control while retaining a stake, or bringing in a minority investor. It may also negotiate an exit only for the relatives who want liquidity. For those who intend to stay and grow, alternatives include partnering with a strategic investor or acquiring complementary companies. A corporate reorganisation may precede these decisions.

There is no single correct structure for every family. The most suitable alternative depends on the shareholders’ objectives, the company’s situation and market conditions.

Partial sale and staying in the business

A partial sale can give the family liquidity while allowing it to share in the company’s future appreciation. A new partner may also bring access to new markets, professional management or strategic capabilities.

It is important to distinguish where the proceeds go. In the purchase of existing shares, payment goes to the selling shareholders. In a capital increase, the funds enter the company to finance its activities and investments. A transaction may combine both, addressing the family’s liquidity needs and the company’s growth plan.

Staying in the business, however, requires careful negotiation. Beyond price, the parties must define governance rights, board composition, veto matters, dividend policy, executive responsibilities and mechanisms for a future exit. It is also important to establish the founder’s role after the transaction. A lack of clarity about that role can create conflict between the family and the new investor.

How to compare price and terms in an offer

Comparing offers requires looking beyond the headline value. Upfront or deferred payment, amounts contingent on future performance, guarantees, liability for contingencies and founder retention obligations all affect the outcome. For the family, it also matters when the funds will be available and which commitments remain after closing.

An offer with a higher price but a relevant portion tied to future targets may deliver a different result from one paid in full at closing. The analysis must weigh value, risk and terms in each alternative.

Governance before the transaction

Governance does not need to be fully developed for a family business to evaluate an M&A transaction. Still, the more organised the decision-making processes, the financial information and the relationships among shareholders, the lower the uncertainty during negotiation.

Preparation may include aligning shareholders on the objectives of the transaction, appointing family representatives for the process, reviewing shareholders’ agreements, separating family and company expenses, organising financial statements and management information, formalising key contracts, identifying tax, labour and regulatory contingencies, defining the roles held by family members, assessing the company’s dependence on the founder and preparing management for buyer due diligence.

This groundwork helps investors understand the business and reduces the risk of internal disagreements surfacing at advanced stages of the transaction.

How an M&A advisor works with family businesses

M&A advisory supports shareholders in preparing and negotiating purchases, sales and business combinations. The financial advisor works with the family from strategy definition through negotiation and closing.

1. 1

   Defining objectives

   Understand shareholder expectations and assess alternatives for liquidity, growth and future participation in the business.

2. 2

   Preparation

   Organise financial and operating information, value the company and prepare investor materials.

3. 3

   Market approach

   Identify potential buyers or investors, run confidential outreach and organise the offers received.

4. 4

   Negotiation

   Compare economic terms, support negotiations and coordinate due diligence and the timetable to closing.

The financial advisor does not replace lawyers, accountants or tax specialists. Those professionals play complementary roles, particularly on corporate structure, contracts, taxation and risk analysis.

Illustrative situations

The examples below are hypothetical and serve only to explain structuring alternatives. They do not represent JK Capital clients or transactions.

Partial sale to combine liquidity and growth. A company controlled by the first generation is growing, but most of the family’s wealth remains concentrated in the business. One possibility would be to combine the purchase of part of the founders’ shares with a capital increase. The first portion would generate liquidity for the sellers; the second would fund expansion. Final ownership percentages and governance rules would have to be negotiated to reconcile the investment with the family’s wish to keep control.

Sale of control when there is no successor. The founder of a family company intends to reduce involvement in management, but the heirs are pursuing other careers. One possibility would be to seek a strategic buyer interested in continuity and in the leadership transition. The sale could also give the family resources to diversify its wealth. The founder’s role during the transition and commitments regarding the team and the company’s identity would need to be discussed in the negotiation.

Exit for some shareholders and continuity for others. In a company with several family branches, part of the shareholders want liquidity while another group intends to stay. One possibility would be to negotiate the purchase of the exiting shareholders’ stakes by a new investor. Feasibility would depend on the corporate rules, the buyer’s interest and the agreement among the remaining shareholders. These examples show why transaction design should start with the shareholders’ objectives, not only with the pursuit of the highest price.

How to choose an M&A advisor

Choosing the financial advisor is especially relevant in family businesses, where confidentiality, trust and alignment among shareholders directly affect the process. The assessment should consider experience with family businesses, sector knowledge and a track record of completed transactions. It is worth reviewing examples of past work and understanding how the advisor identifies strategic and financial investors.

The scope of work, fees, potential conflicts of interest, confidentiality procedures and coordination with other advisors should also be clarified. These points help shareholders compare engagement proposals beyond cost. It is equally important to understand who will run the work day to day. In a process that may last several months, the quality of the relationship between the family and the team influences how decisions are made.

When to start preparing

The best time to prepare a family business for a potential transaction is usually before there is any urgency to sell. A process started under pressure can limit the family’s alternatives and reduce its negotiating capacity.

Even if a sale is not imminent, preparation makes it possible to identify governance adjustments, reduce dependencies, organise information and discuss expectations among shareholders. In the end, the family may conclude that the best decision is to sell, bring in a partner, professionalise management or remain independent. Deciding not to transact can also be the result of a well-conducted strategic process.

How JK Capital works

Founded in 2011, JK Capital is an independent financial advisory firm specialised in mergers and acquisitions, capital raising and debt structuring.

JK Capital advises shareholders of family businesses on full or partial sales, investor entries and acquisitions. The work begins by defining the objectives of the transaction, including the liquidity sought, the stake the family wishes to keep and its role in management afterwards. Those choices guide the company’s preparation, the selection of potential counterparties and the comparison of offers.

Information on JK Capital’s services and a selection of publicly announced transactions is available on the institutional website. The list gathers disclosed transactions across sectors and does not classify all companies involved as family businesses.

Frequently asked questions

Is it possible to sell part of the company and stay in management? Yes, provided this is agreed with the investor. Ownership and executive roles are distinct matters: the negotiation should define responsibilities, autonomy, compensation and the duration of the transition or continued role.

Does bringing in an investor mean losing control? Not necessarily. The investor may take a minority stake. Even so, veto rights and decision rules can change the current shareholders’ autonomy. Ownership percentage must be assessed together with the rights negotiated.

What is the difference between selling shares and raising capital? In the sale of existing shares, proceeds go to the selling shareholders. In a capital increase, they go into the company. A single transaction may combine both, with amounts and purposes defined for each portion.

Does governance have to be fully organised before starting a negotiation? Not every adjustment must be completed before assessing alternatives. Shareholders should, however, align their objectives and identify open issues that could affect the negotiation. Preparation helps define what must be resolved before approaching investors and what can be handled during the process.

How is confidentiality preserved during the process? The process can start with a blind profile that does not identify the company. Additional information is shared gradually with selected parties, under confidentiality agreements and access controls. These measures reduce the risk of disclosure but do not eliminate it entirely.

References

Brazilian Institute of Corporate Governance (IBGC), “Specific features of governance in a family business”; IBGC, “Succession, one of the greatest challenges for family businesses”; IBGC, Centre for Business Family Governance.

Informational content; it does not constitute investment advice or legal advice.