The Secret Recipe for a Successful Ownership Transition

I’ve had the pleasure of working with many successful A/E firms over the years, ranging from small, first-generation firms, to companies that have been operating continuously for 50 years or more (including some that were founded in the late 1800s). I’ve always taken an interest in understanding how firms that have survived through multiple generations of ownership have accomplished such a feat. From my anecdotal observations, I’ve concluded that while there is no single recipe for a successful ownership transition, there ARE a number of common ingredients.

These “success ingredients” often include legal or financial aspects of transition plans, such as how a firm values its shares, how stock redemptions are financed, and whether shareholders are bound by non-compete agreements. But they can also include cultural or human resource matters, such as how internal communications are handled, how a company is structured organizationally, how concentrated or distributed its ownership is, how new leaders are trained and groomed, and how new owners are selected.

Firms that have managed their way through multiple generations of ownership may have learned the key ingredients though many years of trial and error, but owners nearing retirement age have precious little time for experimentation, and the penalty for failure is high.

A successful transition ensures the continuity of the business, provides job security for the staff, and a healthy return on investment of the company’s shareholders. A failed transition could leave a company with no choice but to shut its doors—leaving clients in the lurch, employees without jobs, and shareholders with little or no value for their stock.

Wouldn’t it be great if there was a single resource detailing the practices of A/E firms with respect to ownership structure and ownership transition–a resource that first generation firms could use to discover those “key ingredients” for a successful ownership plan, and that well-established firms could use to benchmark and refine their plans and policies? What if such a study went even further—analyzing and isolating best practices, and allowing a firm to compare its own ownership structure and policies to those of its peers?

I’m pleased to announce that together with the research and publishing firm Practice Lab, we are developing just such a resource. But we need your help. We invite you to participate in this confidential on-line survey by clicking on the button below:

Start Survey

Below are just some of the topics the survey will cover:

  • The prevalence of various corporate structures
  • Ratios of owners to staff
  • Ownership interest distribution / concentration
  • Stock valuation methodolgy
  • Stock redemption financing terms
  • Stock purchase financing terms
  • Employee stock ownership plans (ESOPs)
  • Phantom stock and stock appreciation rights (SAR) plans
  • Shareholder agreement terms and provisions
  • Non-compete and non-solicitation agreements
  • Transition planning and modeling
  • Profit distribution polices
  • Composition of board of directors

As a participant, you’ll receive a summary report of the findings together with commentary and analysis on the state of ownership transition in the A/E industry. You will also have access to personalized online reports comparing your answers to the survey findings.

I hope you’ll take a moment to participate in the survey be a part of this important new study.