PASS­ING BA­TON ON FAM­ILY BUSI­NESS

The Denver Post - - BUSINESS - By Thomas Heath

Pres­i­dent-elect Don­ald Trump will hand over the fam­ily busi­ness to his el­dest chil­dren when takes of­fice next month, but turn­ing over the reins to the next gen­er­a­tion comes with some risk. Ask the Stroh beer fam­ily or the Guc­cis.

Pres­i­dent-elect Don­ald Trump has said he will dis­en­gage from his sprawl­ing fam­ily busi­ness and pass it on to three of his chil­dren to run. Eas­ier said than done. Pass­ing on a fam­ily busi­ness to heirs, whether they are in­volved or not, can be a very knotty dilemma, rife with dis­agree­ments, law­suit, jeal­ousy, es­trange­ments, you name it.

Trump – who Forbes magazine says is worth $3.7 bil­lion – has said he would build a wall be­tween the pres­i­dency and the Trump Or­ga­ni­za­tion to pre­vent con­flicts of in­ter­est from seep­ing be­tween busi­ness and pol­i­tics.

In this case that means pass­ing on a large busi­ness to the next gen­er­a­tion to run, and mak­ing sure they know how to do it, are com­fort­able with their as­signed roles and – most im­por­tantly – get along.

The three el­dest Trump kids have been deeply in­volved in the busi­ness for years, ac­cord­ing to an anal­y­sis of the com­pany by The New York Times.

They – Don­ald Jr., 38; Ivanka, 35; and Eric, 32 – and a team of ex­ec­u­tives will be as­sum­ing re­spon­si­bil­ity for the Trump Or­ga­ni­za­tion, ac­cord­ing to the the pres­i­dent-elect.

The three, each a vice pres­i­dent of de­vel­op­ment and ac­qui­si­tions, have said they like each other and called the Trump Or­ga­ni­za­tion a “mom and pop” busi­ness, ac­cord­ing to The Times.

“I’m very op­ti­mistic that they can do it,” said Ted Clark, direc­tor of North­east­ern Univer­sity’s Cen­ter for Fam­ily Busi­ness. “When you think of the ac­cess to ex­cess that th­ese kids have had, they seem to be very fo­cused and pos­i­tively ori­ented. They are very im­pres­sive.”

Fam­ily feuds

There are am­ple cases where suc­ces­sion plans back­fired. Or there wasn’t a suc­ces­sion plan to be­gin with.

When talk­ing about the re­spon­si­bil­ity of tak­ing over Feld En­ter­tain­ment, built on fran­chises such as Rin­gling Bros. and Bar­num & Bai­ley Cir­cus and Dis­ney on Ice, Ni­cole Feld has said: “It al­ways sits there in the back of your mind . . . that phrase: ‘It takes three gen­er­a­tions to ruin a busi­ness. The first gen­er­a­tion builds it. The sec­ond gen­er­a­tion grows it. And the third one usu­ally destroys it.’ We live with that ev­ery sin­gle day.”

There’s even a book about it, called “Fam­ily Wars,” which chron­i­cles the many ways a fam­ily busi­ness can crater.

Take the Gucci fam­ily, the leather goods brood whose third-gen­er­a­tion leader was shot dead on his way to work in 1995. “The hit was or­dered by his former wife, Pa­trizia, to punish him for sell­ing his 50 per­cent stake and de­priv­ing their chil­dren of in­her­i­tances,” ac­cord­ing to the Fi­nan­cial Times.

The Stroh fam­ily, whose beer for­tune took a cen­tury to build, was pro­filed in Forbes two years ago un­der the ig­no­min­ious head­line, “How to Blow $9 Bil­lion. The Fallen Stroh Fam­ily.”

We only need to look at the re­cent feud be­tween Sum­ner Red­stone and his daugh­ter, Shari Red­stone, for con­trol of the fam­ily em­pire, Na­tional Amuse­ments. The Pritzker fam­ily in Chicago, owner of the Hy­att Ho­tel chain, had to liq­ui­date parts of the fam­ily for­tune, in­clud­ing one piece sold to War­ren Buf­fett, af­ter rel­a­tives de­manded cash.

The Trumps

What might hap­pen with Trump?

“The Trump fam­ily’s sit­u­a­tion is a clas­sic case of what I call ac­ci­den­tal part­ners – peo­ple who are sud­denly forced to be busi­ness part­ners when ex­ter­nal fac­tors are push­ing them to­gether, not their own de­sire or de­ci­sion to choose each other as part­ners,” said David Gage, founder of BMC As­so­ci­ates, an Ar­ling­ton, Va., com­pany that con­sults to fam­ily and non-fam­ily busi­nesses on how to trans­fer busi­nesses to the next gen­er­a­tion.

Gage of­fered th­ese tips for Trump — or any­one look­ing to move the busi­ness into the next gen­er­a­tion:

• Plan­ning is key: Par­ents can’t re­li­ably pre­dict when they’re go­ing to be, say, tapped to be pres­i­dent, or need to di­vest, or trans­fer, their own­er­ship for some other rea­son, so they should start plan­ning now to get the kids ready “just in case.”

• Get along: The ex­pec­ta­tions and dy­nam­ics of sib­ling part­ners are dif­fer­ent in some im­por­tant ways than they are with nor­mal sib­lings.

• The Mar-a-Lago re­treat: So should Pres­i­dent-elect Trump de­cide how the next gen­er­a­tion should work to­gether? No. In­stead, he should tell his chil­dren to go off to Camp David, or Mar-a-Lago, and spend three days ham­mer­ing out ex­actly how they think they could work to­gether as a team. Who would have which roles? What au­thor­ity would each of them have to make de­ci­sions? How will they com­mu­ni­cate with one another? How will they han­dle their dif­fer­ences and any con­flicts that arise?

“Th­ese are some of the crit­i­cal ques­tions that they should answer for them­selves, es­sen­tially cre­at­ing a ‘Part­ner­ship Char­ter’ for them­selves,” Gage said.

Clark is an op­ti­mist who said things may go smoother than peo­ple think. He said Trump has stepped back from the day-to-day op­er­a­tions for months, if not years, which makes it likely that there al­ready stands a strong net­work in and around the chil­dren to carry on the busi­ness with­out him.

“There is cer­tain bal­last in the Trump Or­ga­ni­za­tion al­ready, with many high­level ex­ec­u­tives in man­age­ment,” he said. “Th­ese are pro­fes­sion­als, and they can run the busi­ness.”

From left, Pres­i­dent-elect Don­ald Trump’s wife, Me­la­nia, daugh­ter Ivanka, and sons Eric and Don­ald Trump Jr. at­tend the Oc­to­ber town hall de­bate in St Louis. Trump is putting the sib­lings in charge of his fam­ily busi­ness. Getty Im­ages

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