It was only a friendly visit with an investment banker. But Don Silver inexplicably felt his heart pounding as the elevator ascended toward the office of Legg Mason in the Mellon Bank Center, one of the tallest office skyscrapers in Philadelphia.
Two years earlier—in 1999—Silver had orchestrated the sale of Penn Ventilation Companies, his family’s third-generation Philadelphia manufacturing concern, to Hart & Cooley Inc., a subsidiary of Chicago-based Falcon Building Products. In the process, he had orchestrated himself out of a job as Penn Ventilation’s chief executive. The investment banker he was now visiting had helped his family close the deal. Since the sale, Silver had contentedly worked on a novel, taught English part-time and done some business consulting. But as the elevator shot upward, a long-buried sense of dread returned as he recalled the anxiety-ridden discussions that preceded Penn Ventilation’s sale.
Selling the $80 million firm “was the most harrowing experience I ever had,” says Silver, now 44. “Negotiations at that level are very clinical and cold. I’d take ten unsuccessful sales calls over one of those meetings.”
Most members of business-owning families have spent their lives focusing on the enterprise—“even sitting around the dinner table as a kid,” Silver says. Relinquishing the object of this intense concentration to an outsider can be gut-wrenching—even if everyone in the family agrees that selling is the right thing to do. “We all felt as if we were lying on an operating table, and the anesthesia was gone, but we were being operated on anyway,” he recalls.
“I must have had every emotion,” says Silver, shifting uncomfortably and looking down at the table in the dining room that doubles as his home office in Philadelphia’s tweedy Chestnut Hill neighborhood. “Personally, I felt disappointed. I felt guilty, as though I had let some legacy down.”
Silver, who had worked in the music industry before joining Penn Ventilation in 1984, looked forward after the sale to devoting more time to the creative arts. Even so, it was hard to let go of the family business, where he worked alongside his cousin and semi-retired uncle as well as his father, Penn Ventilation chairman Bob Silver, who was 64 at the time of the sale.
“There was a point at which I was very concerned about my legacy and about disappointing the memory of my grandfather,” Don Silver recalls. “But my father said, ‘He’s dead, Don—he doesn’t care.’ It was a wonderfully practical and obvious thing to say, but for a man to say it about his own father was interesting.”
Owners who sell their companies often must grapple with feelings of loss, says Jeffrey Rothstein, a family business consultant in Denver. “Most of their reputation and identity is tied up in the business,” Rothstein says. Once the company’s gone, he notes, they must grapple with philosophical questions—like, “How will I define myself? How will others define me?”—as well as practical ones, such as, “When I get up in the morning, where am I going to go?”
“I fired myself,” says Richard L. Haid, who was 57 in 1988 when he sold Parrish & Haid, the Hamilton, Ohio insurance agency he had inherited from his father. The agency, Haid says, generated “several million dollars a year” in total premiums and had seven employees. Although he decided to sell because he’d grown disenchanted with the routine, he still experienced some of the grief that accompanies the loss of one’s life’s work. “I had an office for another month, but there was nobody around,” he says. “I didn’t have my wonderful staff.”
But Haid found his new life was full of possibilities. He began studies at Cincinnati’s Union Institute and received a doctorate in adult development in 1994. “I got my doctorate and my Medicare card within two years of each other,” he quips. His dissertation was a study of ten family business CEOs between the ages of 60 and 80 who had stepped down from their posts. That led him into a new career as an “adult mentor” who leads workshops and counsels executives who are leaving their businesses.
“When you’re a head of a business, you’re a ‘Who’s Who,’” Haid notes. But after selling their companies, many former CEOs tend to consider themselves has-beens. Haid says he helps them put a new spin on the situation: “I think of it as, ‘Who are you going to be?’”
Two years ago Haid earned the title of Professional Certified Coach from the International Coaching Federation. “The most important time to have a résumé is when you’re finished your regular work life and ready to meet the world on your terms,” he says.
While many working people cherish the traditional notion of retirement, CEOs often resist the concept, notes consultant Jeffrey Rothstein. “Their businesses are both their babies and their mistresses,” Rothstein says. “A person doesn’t go from working 60 hours a week to sitting on a porch all day. Those people die within two years.”
Rothstein helps family business executives who are stepping down to examine their legacy and learn to appreciate what they’ve achieved. He also helps them develop “a business plan for the next chapter of their lives.” Ideally, this process should begin while the executive is still working, so his new leisure time doesn’t come as a shock. For example, Rothstein advises clients to take increasingly longer vacations before their tenure ends to help them envision life without the business.
Flory Netsch Hiatrides views the sale of her company as part of her career’s logical progression. She started Executive Education Institute (EEI) of Mamaroneck, N.Y., as a personal computer training firm when she was just 19 years old, with the help of several of her professors at Iona College in New Rochelle, N.Y. By the time she sold it in October 2000 to publicly traded Provant Inc., she was 39 and her company had blossomed into a management training and consulting firm that generated $5.4 million in annual revenues. Her mother, Flora Netsch, now 77, worked as the company’s accountant; a sister, a brother-in-law and several cousins also have been on the payroll over the years.
Hiatrides, who stayed on with Provant after the sale, says she sold the company to become more effective in serving her clients, most of which are Fortune 1000 firms. “As they merge and get larger, the organization they need to provide consulting has to get larger.” Selling to a publicly traded firm would enable the company and its key employees to grow, she reasons. “I wanted a bigger playing field to manage. I could have gotten to $10 million, but I couldn’t have gotten to $20 million.”
Closing the deal “felt like an accomplishment” and enabled her to keep some long-standing promises, Hiatrides says. She got over the difficulty of selling an enterprise she had started from scratch by analyzing the benefits for herself, her staff and her clients and negotiating to ensure they all would be properly taken care of. (She says she shared the proceeds of the sale with her long-time managers.) “The emotional planning came from doing all this other planning,” she says.
At Provant, she now holds the title of “president—Executive Education Institute.” Her duties include overseeing operations and staff development, directing implementation of corporate training programs and evaluating the organization’s consulting services and seminar offerings. But she’s free from day-to-day management responsibilities. “I’m doing more of what I love and less of what I don’t love,” she says. Her mother’s accounting duties expanded after the sale; Flora Netsch now is happily working more hours than she did before, her daughter reports.
Thinking about selling your company before any suitors have appeared helps prevent seller’s remorse, notes James A. Murphy of de Visscher, Olson & Allen LLC, a financial consulting firm in Greenwich, Conn. “Those who have planned the business may be more comfortable selling the business,” says Murphy, who advised Hiatrides on the sale of her company. Owners who’ve met their goals for the enterprise are more likely to have a positive experience than those who are selling in response to market trends or an attractive offer. “If you’ve thought it through, and know the reasons you’re selling the business, you’re likely to have an easier time,” Murphy says. By contrast, owners who’ve sold only for the money can wind up feeling empty at the end of the process.
Gary Furst admits to “some scary thoughts and sleepless nights” when he negotiated the 1992 sale of American Brush Co., his family’s fourth-generation, $20 million company in Claremont, N.H. The business was healthy, says Furst, who was the CEO. But “I was increasingly concerned over the long-term prospects of the industry, which was going through massive consolidation both on the supply side and on the customer side.”
Although the sale of American Brush to Stanley Tool would greatly increase his personal wealth, Furst, now 50, says he kept wondering, “Had I not been, through birth, the son of a business owner, would I have reached this level? That’s something that goes through your mind until you land that second position. Am I going to be successful, or am I going to take the money I have in the bank and blow it?”
After the sale, Furst stayed on for three years as president of what became Stanley’s American Brush division. He also attended a four-month advanced management program at Harvard Business School, where he found himself unable to resist the temptation to compare himself unfavorably to his “very, very accomplished” classmates.
But he soon found an opportunity to rack up some major accomplishments of his own. Before selling American Brush, Furst had been approached for advice by Michael and Peter Zane, two brothers he had known for years. The Zanes owned Kryptonite Corp. of Canton, Mass., a manufacturer of locks for bicycles. Their father, Ernest Zane—owner of Dietronics Inc., a company based in the same building as Kryptonite and the manufacturing supplier for Kryptonite’s bicycle locks—had died in 1989. Ernest had been the Zane brothers’ mentor and had guided them in managing their finances. Though he had never held a formal position at Kryptonite, his sons Peter and Michael, now 50 and 54, felt the loss of his leadership. Off-shore competition was causing Kryptonite to lose market share.
Drawing on his own family’s experience at American Brush, Furst suggested the Zanes establish an outside board of directors. They took his advice and asked him to join the board, which he did in 1991. From a director’s position, Furst had a bird’s-eye view of the company’s troubles.
As Furst finished up his tenure with Stanley, he and the Zanes began to discuss an increased role for him at Kryptonite. “At first, we talked about me becoming chairman of the board, but the company really needed more than that,” Furst says. “They needed someone to replace the father figure—someone to be their boss.”
Furst became Kryptonite’s CEO in 1995. The parties negotiated a contract that gave him authority as well as responsibility. “At one point, Michael said to me, ‘Will you fire me if you feel it’s necessary?’” Furst recalls. “I said, ‘Yes,’ and he said, ‘That’s the right answer.’”
Today, Kryptonite is thriving. Furst—who exercised his stock options and became a minority shareholder—has expanded the company’s offerings into computer security as well as a security for the home and job-site. In 2000, it generated $27.5 million in revenues. Peter Zane is now Kryptonite’s president, responsible for sales. His older brother Michael has stepped back from the business.
Furst says leaving his own family’s business to join another family firm enables him to enjoy all the advantages of a close working relationship but none of the emotional issues arising from having grown up together. Another benefit is the opportunity to work with the Zanes’ mother, Lillian, 80, who still serves as Kryptonite’s treasurer/secretary. “Lillian’s not my mother, but I feel very, very close to her,” Furst says. The experience reminds him of working with his own grandfather at American Brush, he says. “To me, the most beautiful part of being in the business was working by his side every day.”
When Don Silver closed the deal relinquishing his family’s control of Penn Ventilation, he felt numb as he signed the final papers. “It took me almost a year to dare think about the whole thing and try to get some perspective on it,” he recalls.
The ventilation industry was consolidating. In 1997, Silver’s company had acquired another business about one-third the size of Penn Ventilation. More capital was needed to manage the acquisition and grow both businesses. The family decided to sell instead.
With the end of the process came “a tremendous amount of relief,” Silver says. “We were removed from enormous pressure.” (In 1999, Falcon Building Products sold most of its businesses, including Hart & Cooley, the subsidiary that had bought the Silvers’ Penn Ventilation Companies.)
Freed of their professional ties, his family began to relate to each other in new ways. He drew closer to his second cousin Dean Malissa, 48, the company’s senior vice president, who had worked closely with him but hadn’t shared many holiday celebrations with the Silvers’ branch of the family. “We have some business we continue to watch over together,” Silver says. When they get together these days, they reminisce about their days in the trenches at Penn Ventilation. “We share a lot of laughs.”
Silver’s relationship with his father changed, too. Although they had been close during Don’s youth, after he joined the company in 1984 at age 28, “barriers came up that I never expected to see.” Because Bob Silver had been Don’s boss for many years, the son felt uncomfortable discussing matters such as his personal finances. But once the company was sold, “we got back to the relationship I’d had with him since I was a kid,” Don says. Although Bob Silver had thrived in the high-stress, high-intensity world of a business owner, after the sale “he became a retired guy” and readily put the company out of his mind, Don reports. Today, Bob serves on the board of the Philadelphia Geriatric Center, a Jewish-sponsored non-profit organization; until recently, he also remained active in a ventilation trade association.
Don himself was relieved of the need to master the technical minutiae of the ventilation business. That was no small task for a self-described “right-brain guy.” Within five months of Penn Ventilation’s sale, Don earned a master of fine arts degree in creative writing from Bennington College. He’s begun a novel and has written poems and essays. Recently, an essay he wrote was nominated for a Pushcart Prize, which recognizes excellence in writings published by small presses.
He’s also taught English and business as an adjunct professor at Philadelphia-area colleges. (He’s since relinquished the business courses.) For a year, he served as executive director of the Family Business Alliance at Temple University’s Fox School of Business. Today, he’s a private consultant to family businesses and a consultant for Ben Franklin Technology Partners, a Pennsylvania state network. He’s chairman of a group of CEOs in the Philadelphia area under the auspices of TEC Worldwide (also known as The Executive Committee), a think tank dedicated to increasing the effectiveness and enhancing the lives of CEOs.
“Life after a family business for me has been wonderful and diverse,” he says. By contrast, in his former life at Penn Ventilation he was “thoroughly absorbed by an activity that was not a perfect fit but was consuming every moment I had.”
The Johnson Companies, an employee benefits and compensation consulting firm founded by Edwin T. Johnson in the 1950s, became a legend in the benefits field for developing the 401(k) in 1981. Johnson’s brother, son and daughter were working for the Bucks County, Pa., enterprise when it was sold in 1990 to a British company, Noble Lowndes. The firm had sales of nearly $25 million, was growing at more than 20% annually, and had offices from Washington, D.C., to Boston. More than 100 of the 400 employees owned some stake in the firm, recalls Edwin Johnson, who was 60 at the time of the sale.
The firm’s suitors included large mutual funds as well as asset managers and insurance companies and brokers, which coveted the assets in the Johnson Companies’ 401(k) plans. Major investment houses were attracted by the Johnson firm’s consulting expertise. “We realized we ought to sell while the tree was full of fruit,” Johnson recalls.
His staff understood why the firm was being sold, Johnson says. “They knew everything; that was our style.” As part of the deal, he secured contracts with the acquiring company for 48 employees: three-year deals for six or seven executive committee members and two-year contracts for other employees.
Johnson says he and his staff had no trouble letting go of his pioneering firm: “There are people who are emotional about business, but I’m not at all. A corporate entity is not something I attach to. I know that I’m in the minority for not wanting to see that my kids take the business, but that’s not the key.” In fact, Johnson’s children and brother helped him make the decision to sell. When he signed the final papers that closed the sale, Johnson recalls marveling that “I never thought that this little company that I started could do this for us.”
Many of his former staffers have since gone into business together. “Most of my executive committee are running benefits companies now,” Johnson says. They keep in touch frequently via e-mail, he says. “It’s like Old Home Week when I go to visit them.”
After the sale, Johnson increased his investment in a charitable foundation he had established earlier. He’s now chairman of a trust company in Indiana and serves on the managing board of the Jackson Laboratory, a non-profit mammalian research organization. He’s also active in the Lincoln and Soldiers Institute at Gettysburg College, which awards a prize in Civil War studies, and in a Philadelphia-area angel network, Loosely Organized Retired Executives (LORE). He and his wife have a vacation home in Maine and visit frequently with their son, E. Thomas Johnson Jr., 46, a senior vice president at MassMutual Insurance Co. in Hingham, Mass. Their daughter, Rebecca Johnson Kerchner, 45, works for Persumma Financial, a benefits administration company. Though it’s based in Massachusetts, her office is in Pennsylvania—she lives about four doors away from her father’s Pennsylvania home. “We’re a close family,” he says.
Of course it’s not always easy to watch what happens to the family’s “baby” after it leaves the family’s hands. Edwin Johnson says he felt the frustration of seeing a major project that he spearheaded as a consultant to the acquiring firm abandoned before it was implemented. But he and his staff learned to accept the situation lightheartedly. “When you’re not the boss any more, you have no choice but to let go,” he says philosophically.
Gary Furst also expresses dismay at changes in his former company. In 1996, Stanley Tool sold American Brush to Linzer Products Corp. of Flushing, N.Y. In late 2000, the Occupational Safety and Health Administration cited American Brush for serious violations of OSHA standards. (The case has since been settled.) “I’ve gotten lots and lots of phone calls and letters from employees who wish for the good old days,” Furst says.
But he acknowledges there’s nothing he can do about it. “Someone else bought the house, and they’re allowed to re-decorate,” he says. “They may choose a color you don’t find attractive, but maybe that works for them.
“You need to look forward,” says Furst. “I love what I’m doing. I’m much happier than I was 15 years ago—never mind that I’m much wealthier today than I was 15 years ago.”