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In case the author is reading this, I am wondering why Dad did not have a succession plan, and was it ever discussed in the family what should happen after? Wha

In case the author is reading this, I am wondering why Dad did not have a succession plan, and was it ever discussed in the family what should happen after? What was dad’s plan?

IshanMi 2y ago
The author mentions that his father was in touch with a PE-backed chemical company a month before he passed, who re-engaged a month after- sounds like that might have been his succession plan?
jalapenos 2y ago
From reading it, and the various references to various potential buyers his father had already been in discussion with, it appears his plan was to sell it before that. This is a big problem with these kinds of businesses. A lot of these solo owners who build up a business over the course of many decades serious underestimate how hard they are to sell, and have an unrealistic idea of what valuation they'll be able to get. There is a whole industry of those bottom feeders the author referred to, who's business is precisely waiting for these sole owners to either die, or better yet become incapacitated to the extent they are forced to sell their businesses (but not so much that they can't hold a pen and read a sales contract), so that they can swoop in and offer them 2x or 3x - "what's your best alternative?".
- amadeuspagel 2y ago
  If there's a whole industry of them, shouldn't there be lots of competition to buy these companies?
  - actionfromafar 2y ago
    A whole industry of bottom-feeders buyers, but the companies they are buying are not necessarily in the same markets as each other, at all.
  - bell-cot 2y ago
    There's vastly more profit in buying a few companies at 33 paise on the rupee than in buying lots of companies at 99 paise on the rupee. And coordinated punishment of any newcomers - who try to disrupt a status quo of systematic underbidding - does not even require communication between the incumbents.
    - smcin 2y ago
      What exactly is the coordinated punishment of newcomers?
      - bell-cot 2y ago
        The simplest tactic is to bid up anything they're trying to buy to 101+ paise on the rupee.
        lotsofpulp 2y ago
        Then who is buying at 33 paise? You are contradicting yourself. If something “worth” 1 rupee is not selling for 1 rupee,then the logical conclusion, absent collusion/cartel/monopsony behavior, is that it is not worth 1 rupee or even 99 paise, but rather the 33 paise that it is selling at.
        bell-cot 2y ago
        The established players - and occasional well-behaved newcomers - are buying at (say) 33 paise on the rupee. The "1 rupee" is what the business would be worth, in a highly efficient, open market. Which this market clearly is not. And the regulars are quietly colluding to keep it that way.
        lotsofpulp 2y ago
        The context of _rm’s post is not about the OP’s dad’s specific business in its specific regulatory environment which may or may not constitute a “highly efficient, open market”. > lot of these solo owners who build up a business over the course of many decades serious underestimate how hard they are to sell, and have an unrealistic idea of what valuation they'll be able to get. From this, I get the sense that _rm was talking about owners of niche businesses that are surprised to find a smaller market of interested buyers, and hence are surprised they cannot sell their business at a price they hoped to get. My point was simply that just because a seller cannot get a buyer to pay the price they hoped, that does not make the buyer a “bad” person.
- daedrdev 2y ago
  Yeah his father probably had been receiving lowball and unserious offers for years if one were to find the right email folder
- FredPret 2y ago
  I'm not commenting on OP or their family business, but a multiple of 2x or 3x could be more than fair for a hands-on small business. Consider that there are large public companies with established management systems that you can buy and hold, completely hands-off, for multiples of 5x - 10x. GM is trading at 5x, lots of banks are in that range, huge equipment rentals, mines, etc.
  - im3w1l 2y ago
    Doesn't a multiple of 5 basically mean the market is seriously worried that the business will shrink / go bankrupt?
    - FredPret 2y ago
      Perhaps, but investors are neither fully informed nor fully rational. People get overexcited about new trends, then everybody jumps on the bandwagon, and good but boring stocks are ignored. Doesn't mean these are weak businesses though.
- lotsofpulp 2y ago
  Why are the buyers referred to in derogatory terms? By the same logic, the seller should also be referred to in the same derogatory terms, for holding out for too high of a price. Or one could do the sensible thing and leave emotion out of it, and realize business is just business. The market price is the price that results in a transaction.
  - chmod775 2y ago
    >Why are the buyers referred to in derogatory terms? Because they are taking advantage of the owner's impaired judgement due to their personal situation/ill health in trying to extract an unfair price. Such behavior is referred to as "morally reprehensible" at best, and is skirting the legal line of what would be considered a contract made under duress at worst.
    - lotsofpulp 2y ago
      So no one should ever buy from someone who is dying or ill? That’s crazy. Supply and demand curves are in constant flux. The seller didn’t like the market prices when they were healthy, that does not mean they are entitled to a minimum price. Everyone gets ill and dies eventually, and everyone knows it. They are free to sell before that at the market price.
      - chmod775 2y ago
        > So no one should ever buy from someone who is dying or ill? You can do that. However there's an issue with basing a business around reaching out to people with bad-faith offers the week their parents died or they were hospitalized themselves.
    - gedy 2y ago
      > Because they are taking advantage of the owner's impaired judgement due to their personal situation/ill health in trying to extract an unfair price I think you are assuming way too much - a lot of older folks sell things "because they are done", and much is upside from when they purchased or started originally. Even when they are ill, many folks just don't care enough about the money enough to wait it out, negotiate, etc.
asanwal 2y ago
Hi - author here. This is a big question tbh and the lack of a succession plan is a function of many things: 1. This was my dad's baby. He loved the engineering and the science of it and so the idea of retiring from it was difficult for him to conceive. Doing that also requires thinking about one's mortality which I also believe was difficult for him. 2. This was a small market business in a tier 2 city in India. Attracting talent that could take it over was challenging. And myself and my siblings having been born and brought up in the States and being utterly clueless about the engineering/science of the company made us a non-starter. 3. As others have pointed out, he was thinking about succession/exit because he knew it was required for the biz to live on and grow. But life unfortunately had other plans and he was taken away from us unexpectedly. There are definitely lots of could haves, should haves, would haves, etc I've thought about afterwards, but this was clearly one of those "play the cards you're dealt" kind of situations. Thanks for reading.
- deleted 2y ago
  [deleted]
- 999900000999 2y ago
  Thanks for writing a great article. I was honestly impressed with how much you cared for your employees. The American way would be to just sell it to the highest bidder without any concern for anything else. Does India have a different social contract? I'd never expect a company to actually look out for my best interest. It seems like you really cared for your team. Are lifers common in India? Back in my grandpa's time, you worked at the same place for 20 years, they gave you a gold watch, and then you retired. Now your expected to jump ship often or your leaving money on the table.
  - asanwal 2y ago
    Thank you. I don't think there is an Indian social contract but having been born and brought up here in the USA, I'd be talking out of my a$$ on that topic :) This was maybe more of an implied or expected contract I had with my dad and mom who built the business and by extension the Atlas team. Job hopping is quite common in India, but that's probably more common in larger cities. In a tier 2 city like where my dad's business was, there are limited options for a plant engineer for example, and as far as I can tell, the skills they have in a fine chemicals plant may not be immediately transferable to a plastics manufacturer. And finally, many were with my dad for 10+ years so probably some amount of comfort in knowing the domain, the job, the boss, etc.
jfdsaflkjv 2y ago
The Dad probably expected to live longer and run the business until then. Sounds like it was a big part of his identity. Besides, most closely-held businesses don't have succession plans anyway.
codegeek 2y ago
This was in India where succession planning for small business is non-existent and if kids don't pick up their family business, it's over. However, even in America, this situation exists for small businesses. With so many baby boomers retiring from businesses like HVAC etc, their kids don't necessarily want to continue the business.

In case the author is reading this, I am wondering why Dad did not have a succession plan, and was it ever discussed in the family what should happen after? What was dad’s plan?

IshanMi 2y ago

The author mentions that his father was in touch with a PE-backed chemical company a month before he passed, who re-engaged a month after- sounds like that might have been his succession plan?

jalapenos 2y ago

From reading it, and the various references to various potential buyers his father had already been in discussion with, it appears his plan was to sell it before that. This is a big problem with these kinds of businesses. A lot of these solo owners who build up a business over the course of many decades serious underestimate how hard they are to sell, and have an unrealistic idea of what valuation they'll be able to get. There is a whole industry of those bottom feeders the author referred to, who's business is precisely waiting for these sole owners to either die, or better yet become incapacitated to the extent they are forced to sell their businesses (but not so much that they can't hold a pen and read a sales contract), so that they can swoop in and offer them 2x or 3x - "what's your best alternative?".

amadeuspagel 2y ago
If there's a whole industry of them, shouldn't there be lots of competition to buy these companies?
- actionfromafar 2y ago
  A whole industry of bottom-feeders buyers, but the companies they are buying are not necessarily in the same markets as each other, at all.
- bell-cot 2y ago
  There's vastly more profit in buying a few companies at 33 paise on the rupee than in buying lots of companies at 99 paise on the rupee. And coordinated punishment of any newcomers - who try to disrupt a status quo of systematic underbidding - does not even require communication between the incumbents.
  - smcin 2y ago
    What exactly is the coordinated punishment of newcomers?
    - bell-cot 2y ago
      The simplest tactic is to bid up anything they're trying to buy to 101+ paise on the rupee.
      - lotsofpulp 2y ago
        Then who is buying at 33 paise? You are contradicting yourself. If something “worth” 1 rupee is not selling for 1 rupee,then the logical conclusion, absent collusion/cartel/monopsony behavior, is that it is not worth 1 rupee or even 99 paise, but rather the 33 paise that it is selling at.
        bell-cot 2y ago
        The established players - and occasional well-behaved newcomers - are buying at (say) 33 paise on the rupee. The "1 rupee" is what the business would be worth, in a highly efficient, open market. Which this market clearly is not. And the regulars are quietly colluding to keep it that way.
        lotsofpulp 2y ago
        The context of _rm’s post is not about the OP’s dad’s specific business in its specific regulatory environment which may or may not constitute a “highly efficient, open market”. > lot of these solo owners who build up a business over the course of many decades serious underestimate how hard they are to sell, and have an unrealistic idea of what valuation they'll be able to get. From this, I get the sense that _rm was talking about owners of niche businesses that are surprised to find a smaller market of interested buyers, and hence are surprised they cannot sell their business at a price they hoped to get. My point was simply that just because a seller cannot get a buyer to pay the price they hoped, that does not make the buyer a “bad” person.
daedrdev 2y ago
Yeah his father probably had been receiving lowball and unserious offers for years if one were to find the right email folder
FredPret 2y ago
I'm not commenting on OP or their family business, but a multiple of 2x or 3x could be more than fair for a hands-on small business. Consider that there are large public companies with established management systems that you can buy and hold, completely hands-off, for multiples of 5x - 10x. GM is trading at 5x, lots of banks are in that range, huge equipment rentals, mines, etc.
- im3w1l 2y ago
  Doesn't a multiple of 5 basically mean the market is seriously worried that the business will shrink / go bankrupt?
  - FredPret 2y ago
    Perhaps, but investors are neither fully informed nor fully rational. People get overexcited about new trends, then everybody jumps on the bandwagon, and good but boring stocks are ignored. Doesn't mean these are weak businesses though.
lotsofpulp 2y ago
Why are the buyers referred to in derogatory terms? By the same logic, the seller should also be referred to in the same derogatory terms, for holding out for too high of a price. Or one could do the sensible thing and leave emotion out of it, and realize business is just business. The market price is the price that results in a transaction.
- chmod775 2y ago
  >Why are the buyers referred to in derogatory terms? Because they are taking advantage of the owner's impaired judgement due to their personal situation/ill health in trying to extract an unfair price. Such behavior is referred to as "morally reprehensible" at best, and is skirting the legal line of what would be considered a contract made under duress at worst.
  - lotsofpulp 2y ago
    So no one should ever buy from someone who is dying or ill? That’s crazy. Supply and demand curves are in constant flux. The seller didn’t like the market prices when they were healthy, that does not mean they are entitled to a minimum price. Everyone gets ill and dies eventually, and everyone knows it. They are free to sell before that at the market price.
    - chmod775 2y ago
      > So no one should ever buy from someone who is dying or ill? You can do that. However there's an issue with basing a business around reaching out to people with bad-faith offers the week their parents died or they were hospitalized themselves.
  - gedy 2y ago
    > Because they are taking advantage of the owner's impaired judgement due to their personal situation/ill health in trying to extract an unfair price I think you are assuming way too much - a lot of older folks sell things "because they are done", and much is upside from when they purchased or started originally. Even when they are ill, many folks just don't care enough about the money enough to wait it out, negotiate, etc.

asanwal 2y ago

Hi - author here. This is a big question tbh and the lack of a succession plan is a function of many things: 1. This was my dad's baby. He loved the engineering and the science of it and so the idea of retiring from it was difficult for him to conceive. Doing that also requires thinking about one's mortality which I also believe was difficult for him. 2. This was a small market business in a tier 2 city in India. Attracting talent that could take it over was challenging. And myself and my siblings having been born and brought up in the States and being utterly clueless about the engineering/science of the company made us a non-starter. 3. As others have pointed out, he was thinking about succession/exit because he knew it was required for the biz to live on and grow. But life unfortunately had other plans and he was taken away from us unexpectedly. There are definitely lots of could haves, should haves, would haves, etc I've thought about afterwards, but this was clearly one of those "play the cards you're dealt" kind of situations. Thanks for reading.

deleted 2y ago
[deleted]
999900000999 2y ago
Thanks for writing a great article. I was honestly impressed with how much you cared for your employees. The American way would be to just sell it to the highest bidder without any concern for anything else. Does India have a different social contract? I'd never expect a company to actually look out for my best interest. It seems like you really cared for your team. Are lifers common in India? Back in my grandpa's time, you worked at the same place for 20 years, they gave you a gold watch, and then you retired. Now your expected to jump ship often or your leaving money on the table.
- asanwal 2y ago
  Thank you. I don't think there is an Indian social contract but having been born and brought up here in the USA, I'd be talking out of my a$$ on that topic :) This was maybe more of an implied or expected contract I had with my dad and mom who built the business and by extension the Atlas team. Job hopping is quite common in India, but that's probably more common in larger cities. In a tier 2 city like where my dad's business was, there are limited options for a plant engineer for example, and as far as I can tell, the skills they have in a fine chemicals plant may not be immediately transferable to a plastics manufacturer. And finally, many were with my dad for 10+ years so probably some amount of comfort in knowing the domain, the job, the boss, etc.

jfdsaflkjv 2y ago

The Dad probably expected to live longer and run the business until then. Sounds like it was a big part of his identity. Besides, most closely-held businesses don't have succession plans anyway.

codegeek 2y ago

This was in India where succession planning for small business is non-existent and if kids don't pick up their family business, it's over. However, even in America, this situation exists for small businesses. With so many baby boomers retiring from businesses like HVAC etc, their kids don't necessarily want to continue the business.