Dow Jones' Bancrofts: Just Another Family

All happy family businesses may be alike, but keeping everybody content when selling the company will require serious openness and trust

Few business families will get a $5 billion offer for their company (see, 6/4/07, "Very Solid Progress"). But many, if not most, will find themselves at least in one respect in a position similar to the Bancroft clan. This group of some three dozen relatives by blood and marriage controls Dow Jones (DJ) and the Wall Street Journal and is the current apple of billionaire Rupert Murdoch's acquisitive eye.

And while the media world's attention is riveted by the possible fate of the venerable WSJ should it become a part of News Corp. (NWS), a more interesting scenario to business observers is playing out within the clan.

The similarity between the influential Bancrofts and even the humblest of family enterprises is this: At some point, almost all family businesses will and probably should consider the possibility of selling the company. A sale is an obvious option in the case of a company that is financially strapped. That's not the case with Dow Jones, which generates good profits despite some concern about its future viability in a rapidly changing media world.

Facing the Issue

A sale is also an obvious attention-getter when someone offers two or three times what the company is worth. Again, that's not the Bancrofts' situation. Murdoch's offer is a substantial premium over Dow Jones' worth as calculated by the stock market before news of the sale talks was released, but it's not that rich.

But the Bancrofts—as well as other business families—should still take time to talk to suitors in almost any circumstance because of one critical factor. That is, themselves. The decision to sell or not to sell, or even whether or not to consider selling, is one of the most potentially divisive a business family will face. For that reason, it must be faced openly. To attempt to avoid the issue is to invite problems.

In most families, especially those that have grown as large as the 34-person Bancroft clan, this will likely become a divided discussion. There will be some who do and some who don't want to sell. And the intensity will range from "It doesn't really matter to me" to outward hostility and open aggression. Some will say this is not what granddad would have wanted. Some will say they should be focusing on increasing the family wealth.

Destroying Family Bonds

But division is predictable and OK, as long as it's not ignored. Although it is possible to bully, ignore, mislead, or otherwise overcome opposition, inevitably the parties to such a dysfunctional deal find other ways to express their viewpoints. Take for example the Koch family, namesakes of the world's largest family business, Koch Industries.

After the company founder's death, two of his sons bought the other two out for a sum not as high as Murdoch is offering, but still amounting to several hundred million dollars. But the sellers still weren't happy, and sued their siblings for more money, eventually losing, and in the process permanently destroying any familial affection the siblings might have felt for one another.

If a family decides to talk to a potential buyer it's important that the discussions address the key issues. Money is, of course, a central concern. But in a family business, it's not the only factor to consider. For instance, many of the Bancrofts are very concerned that the editorial integrity of Dow Jones and the WSJ remain independent of the famously control-minded Murdoch.

In a similar situation, Kentucky media magnate Barry Bingham Sr. sold off the well-regarded Louisville Courier-Journal newspaper as well as broadcast properties after his children squabbled intensely about management of the enterprise. His son, Barry Bingham Jr., never reconciled himself to losing his job at the top of the empire and remained a vocal critic of subsequent owners—as well as of his sisters, one of whom initiated the sale— until his death last year.

Take Relationships Into Account

It's important that any family business ensure that the company will find a buyer who will accept the existing culture, or at least attempt to make a congenial fit. Unlike a business run purely for profit, a family firm is often tied to the family's reputation, feelings of worth, and sense of place in the community. The Bancrofts are unlikely to be happy with each other if any of them pushes through a sale to someone who dishonors the traditions of the organization.

When a family enterprise is sold, it's often an opportunity to clear out the deadwood. The nature of a family-run company is that sometimes people are hired, kept, and compensated based less on their value to the organization than on their value to the family. Thus a long-time employee may receive far more pay than the going rate for a job involving far fewer than the usual responsibilities. The situation can be even more extreme in the case of an actual family member who works at the company. The fates of these employees with family ties must be considered and settled in any sale negotiation.

The one element that is more important than any other in a family business sale of this sort is trust. Unless the price is truly the kind you can't turn down, the family must be assured that they can trust the buyer to deal with their enterprise and identity sensitively. Otherwise, no matter how much money is paid, it may seem like no bargain compared to the harm a poorly handled sale discussion can cause to family relationships.

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