Selling a Family Business Is More than Just a Transaction

Most family business owners who come to Tobin & Company have essentially already made the decision to sell.

They are not tentative about it. They are ready. They have gained enough from their experiences of managing people, carrying operational risk, navigating financial risk, being the person everyone turns to for every decision. They want liquidity, and they want to move on to a different chapter of their lives. They usually have a number in mind, sometimes quite a specific one. They often have a view on who might buy the company, or at least the type of buyer they imagine would be a good fit.

Family business owners often think about the sale of their business as a transaction. A merger, an acquisition, something complex, certainly, but still something with a beginning, a middle and an end.

That framing makes sense, and it’s where most owners naturally start.

Where things begin to require more careful counsel, from a tenured investment banker, is not in the decision to sell, but in what hasn’t yet been fully considered — particularly when the business is owned and operated by family members.

Selling a family business inevitably reaches beyond the business. The sale happens from within the family, with long histories, long-established roles, and deeply ingrained notions of who has earned what, who will stay involved, who will lead and who will finally be able to step away. I relate to these concepts, in part because TOBIN itself is a family business.  This helps shape how I listen and how I advise our clients and prospects, because I know how closely identity, authority and responsibility can become intertwined when family and enterprise overlap.

I meet with family business owners as the decision to sell is being made, but before the implications of that decision have been fully absorbed and before present-day choices begin to constrain the potential sale.  I view their sale not as a clean endpoint, but as a reallocation of cash, net worth, control and future opportunity.  Importantly, these choices affect many more people than the individual signing the documents at the closing table.

The Business May Be Ready. The Family Sometimes Needs More Work.

In many cases, a family business is ready to sell well before the family is ready for what a sale actually means.

The company may be performing well. The financials may be strong. The market may be receptive. From the outside, everything looks aligned. Inside the ownership group, however, key questions may sometimes still be unresolved – not because people are avoiding them deliberately, but because the business has functioned for years on trust, habit and goodwill.

• Who wants to stay with the business after a sale, and in what capacity?
• Who is ready to step away, but hasn’t quite said so out loud?
• Who assumes they will run the company next, and who quietly disagrees?
• Who wants liquidity now, and who expects a longer-term economic future tied to the business?

Those questions will definitely surface later in the process, often under circumstances that allow far less nuance and far less care.  So, it is best to address them now.

I’ve watched very capable families struggle not because the business wasn’t attractive, but because they had never actually articulated, to one another, what each person wanted the future to look like. They had been productive together for years. They just hadn’t been explicit.

Family Roles and Operating Authority Are Not the Same Thing.

Family businesses are built on trust, loyalty and shared experience. Those qualities are real assets, valued by prospective buyers. But they are not substitutes for structure.

Private equity firms, which are often the most likely buyers of successful family-owned companies, tend to be quite open to family involvement. They love the continuity. They like the institutional knowledge. They relish founders who have built something durable enough to hand forward. They are often enthusiastic about second-generation leadership.

But they are also very clear-eyed.

Buyers will look closely at how authority actually functions inside the company. They will want to understand whether leadership roles are clearly defined or informally negotiated, whether family members genuinely work well together or simply coexist, whether decisions can be made efficiently without emotional arbitration.

This buyer scrutiny is not adversarial, although many sellers may take it that way. The scrutiny is practical. Buyers are underwriting the next chapter of the business, using the past as their evidence.

When those internal dynamics are healthy and clearly articulated, they can be a real strength in a sale process. When they are ambiguous, they introduce risk — and risk gets priced.

Founders Often Want Out – Just Not All the Way Out.

Another area that deserves careful thought is the founder’s role post-sale.

Most buyers expect founders to remain involved for a period of time post-purchase. Two years is common. Sometimes longer. That continuity can be stabilizing for employees, customers and partners. For many founders, that request can feel affirming — a recognition that their judgment, relationships and institutional knowledge still matter.

But it raises important questions that are easy to gloss over early on.  What does “staying on” actually mean in practice?   Who gets to decide during that period, and how clearly is that right defined?  How much space is created for the next generation to lead, and how quickly?

If these points aren’t discussed explicitly, they tend to reappear later as operational and governance problems.  The business ends up suspended between eras, with operational leadership neither fully transferred nor fully retained. That ambiguity can show up in due diligence. It affects deal terms. It can complicate what should otherwise be a straightforward transition.

Handled thoughtfully, founder involvement can be an asset. Handled casually, it often results in unclear authority and delayed decision-making during the transition.

Money Changes Incentives.

Liquidity – cash in the bank – is one of the most emotionally charged aspects of a family business sale. It represents security, validation and often a sense of relief. It also changes incentives in ways that are not always obvious at first.

One of the most delicate issues I counsel families through is how much liquidity different family members should take at the initial transaction — particularly those who are expected to remain and run the business post-sale.

Buyers generally want those leaders to retain meaningful equity and not receive too much liquidity at this sale. That expectation reflects a very practical view: the buyer believes the most significant wealth creation will occur later, when the company is sold again in three to five years.  They want the next generation to be economically invested in building toward that outcome.

When too much value is taken off the table in the first transaction, particularly by those expected to continue running the business, the incentive to invest in the next phase and build toward a successful second sale weakens.

Families who navigate this aspect well decide early on who will prioritize liquidity and who will remain economically invested — and they make those decisions explicit to one another.

A Unified Front Is Not About Agreement. It’s About Discipline.

Buyers are perceptive. They notice who speaks first. They notice who defers. They notice where tension lives in the room.

You don’t need perfect harmony behind the scenes in your family business. You do need coherence in front of buyers.

When family disagreements spill into diligence, buyers respond predictably. They protect themselves. They adjust terms. Sometimes they walk. Not with judgment, but out of prudence.

Presenting a unified front while privately managing real differences within the family business takes preparation and restraint. It doesn’t happen accidentally. It happens because the family has done the work early, before decisions start to get made under time constraints and outside scrutiny.

Preparation Creates Options.

Many owners hesitate to prepare because they worry that getting ready to sell somehow commits them to selling. It doesn’t. Preparation creates options: clear financials, defined leadership roles and thoughtful incentive structures. These are not concessions to buyers. They are protections for owners.

Markets will move as they always do. Families who are prepared get to choose how and when they engage. Families who don’t prepare often find their options narrowing quickly.

A Closing Thought.

Selling a family business reshapes more than ownership. It redistributes authority, redefines roles and alters how future opportunity is created and shared — changes that deserve careful attention well before the sale process begins.

The families who navigate this well are not the ones without complexity or disagreement. They are the ones who take the time, early on, to think carefully about leadership, incentives and family dynamics before the process begins to apply pressure.

If a sale is on your horizon and you’d like a thoughtful, experienced perspective before engaging buyers, that’s a conversation I welcome.