28 replies
5h1m
In case the author is reading this, I am wondering why Dad did not have a succession plan, and was it ever discussed in the family what should happen after? What was dad’s plan?
3 replies
3h37m
Wonder if the author could speak about how him already being a founder played into the equation.
Let's say he was a software dev, no team lead, no manager, individual contributor. How would things play out?
2 replies
3h11m
Hi,
Having founded and run CB Insights certainly helped mostly cuz I had some sense of where to focus.
In this case, we had product-market fit to use a tech term. My dad's product was great.
And so I didn't need to worry about that. If I had to worry about that, this probably doesn't unfold as it did.
That meant I just had to worry about 2 things:
1. Making sure we were buying raw materials at rates that allowed us to sell the product profitably 2. 'Ringing the register' aka making sales. And that ultimately is not intellectually hard but just requires effort, i.e. researching, calling, emailing, etc.
1 replies
1h7m
Hey. This is completely unrelated but I wanted to ask if you provide an RSS feed for your blog? I did find a /feed page but I'm unsure if it's working.
0 replies
32m
I set this blog up 24 hours ago and just started moving old writings to it and still have another 200ish to go.
So the honest answer is I don’t know.
Tbh, getting on HN today was completely unexpected.
I believe you can subscribe via email for updates. And hopefully I’ll figure out the RSS thing soon as well. Thanks
2 replies
4h6m
While I don’t think most people would ever find themselves in a similar situation (I certainly hope not),
I'm not sure what the author means by this. Sad though it may be, most people will experience their dad dieing.
And inheriting control of a company sounds like a 1%'er problem if I ever heard one.
What is OP wishing to spare the rest of us from, exactly?
0 replies
4h4m
I think he meant "inheriting a company in a sector you know nothing about".
0 replies
4h1m
I know exactly what the author meant by that. He meant losing a parent at a young age. It doesn't happen to most people.
2 replies
4h0m
Candidly, my only qualification to run Atlas at this time was that I was the founder’s son.
It seems like an even more important qualification was that the founder's son was also a founder. Otherwise this would have been much less likely to work.
0 replies
3h19m
Maybe. Frankly this is a very impressive outcome that is attributable both to the Father's business and management practices, as well as the Son's business and management practices. No matter how good you are at running a web business, if you inherit a totally fucked business with poor practices, very unlikely you could engineer this outcome.
My condolences to the OP and I was happy to read such a well-written article describing a fantastic outcome for his father's company.
0 replies
2h37m
It’s an odd sentence to be honest. Being the son of the founder of a business has been the strongest qualification for running that business for at least 3,000 years.
On top of that he had worked in this same company for two years, had an Ivy League degree, had worked both in startups and large scale investment banking firms, and had founded and run an unrelated $100M+ enterprise.
2 replies
4h32m
Fascinating article, but reading it I kept asking myself: Why not promote someone to CEO? Surely any top-level manager already working at the company will do a better a job then someone who's only qualification is working there 18 years ago.
0 replies
4h10m
The author had business experience having founded and running the successful CB Insights so it's not like some naive well-to-do kid took things over.
By the end you realize the author 1) researched the industry, 2) improved the product mix 3) grew the highest-margin product and 4) sold to a buyer with values that protected his workers and his dad's legacy.
Someone with that quality/ability is really hard to find, even at really big companies.
0 replies
4h26m
Author here
1. He died suddenly so would have been a good thing to explore and do with time. It certainly would have made my life easier :)
2. Building a business that is small to medium-sized with no brand recogntion in a tier 2 city in India doesn't afford you access to tier 1 talent. India's talent and talent preferences are incredibly different than the USA.
1 replies
2h58m
Wouldn't it have been better if ownership of the company, essentially comprised of the workers and managers, actually passed to the workers who knew what they were doing?
To me this just highlights the absurdity of capitalist ownership.
0 replies
2h10m
For them sure, not for OP and family? It wasn't run on a total profit share before OP's father died, it would be weird (and very bad incentive) if that suddenly changed.
No doubt that sort of thing happens sometimes, or especially donating an inheritance to charity, but it being the default would be more absurd to me, when it was already in 'capitalist ownership'.
0 replies
4h7m
Amazing story - shows the importance of succession planning - worked for a family-owned company but the apples did not fall close to the tree - the sons and daughters could not match the father.
Like what happened to Wang.
Today they are technically bankrupt and reluctantly handed over control to seasoned management and they are spinning out parts of the company to raise capital to save the core business.
0 replies
1h49m
This is quite a good story. Since it happened in 2018, I wonder what’s happened to the business since then?
0 replies
1h59m
Sorry to hear about your dad. Seems to have been a good and smart man.
This was a pretty insightful story. Thank you for sharing it.
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52m
This is such a heartwarming story. Thank you for sharing about this Anand. I loved the part about how your dad’s legacy is all the children of employees who could continue their education.
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2h40m
This is incredibly well written (in addition to being substantively compelling). Bravo!
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3h12m
Left field comment but I’d love to be thrown into an MBA-like simulator (HBS?) and have to figure out the industry and the company and stabilize it/make it grow and whatnot within some time window.
Great read, thank you to the author who took the time to write up all that, it was very insightful and must have been fucking difficult in many ways.
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46m
Thank you for sharing this unique story. Some parts of your story resonated with my life, hope you don’t mind me sharing:
* At times it felt like the true sons are the companies they started. They live and breathe in them. I have a strange detachment to my own family because of this.
* Thus, they have serious attachment issues and zero succession plans.
* My mom later passed away too soon and missed out much of the life experience she could have had. Glad that she did travel around the world before death.
* Even after all that, my old man still doesn’t have succession plan. Dunno what’s gonna happen to all the people working for him. And the clock is ticking.
* Like OP, I spent most of my life in the US, so I too would be useless in dealing with the businesses. Even the real estate company (something I know a bit in the US) is far too different back there.
Also, blatant corruption is simply not my cup of tea.
I tried to help them multiple times. I offered to sponsor them green card, but they consistently refused. I offered if they need help finding private equity to liquidate and just retire. Sometimes I wonder if my mom could have been saved with US quality healthcare.
Oh well, I did my best, there was nothing I could have done.
0 replies
58m
Maharashtra has a long history of cooperatives, some of whichquite successful. I wonder if employees brought up or were given a option to form a cooperative, if immediate liquidity was not a major requirement.
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2h16m
This was a great read.
A few years out of school, I took a detour from tech/entrepreneurship to work in my family business (overseeing operations in a construction manufacturing facility, in Egypt), mostly with my Uncle. In my case, though I fully prefer tech as an industry, the deal-breakers were a dismal economic/political climate and an... interesting Uncle.
Apart from that, a lot of the article resonated. A few other things that stood out and made the transition hard for me were: corruption (in the construction industry, hard to avoid) and culture/hierarchy.
From reading it, and the various references to various potential buyers his father had already been in discussion with, it appears his plan was to sell it before that.
This is a big problem with these kinds of businesses. A lot of these solo owners who build up a business over the course of many decades serious underestimate how hard they are to sell, and have an unrealistic idea of what valuation they'll be able to get.
There is a whole industry of those bottom feeders the author referred to, who's business is precisely waiting for these sole owners to either die, or better yet become incapacitated to the extent they are forced to sell their businesses (but not so much that they can't hold a pen and read a sales contract), so that they can swoop in and offer them 2x or 3x - "what's your best alternative?".
If there's a whole industry of them, shouldn't there be lots of competition to buy these companies?
There's vastly more profit in buying a few companies at 33 paise on the rupee than in buying lots of companies at 99 paise on the rupee. And coordinated punishment of any newcomers - who try to disrupt a status quo of systematic underbidding - does not even require communication between the incumbents.
What exactly is the coordinated punishment of newcomers?
The simplest tactic is to bid up anything they're trying to buy to 101+ paise on the rupee.
Then who is buying at 33 paise? You are contradicting yourself.
If something “worth” 1 rupee is not selling for 1 rupee,then the logical conclusion, absent collusion/cartel/monopsony behavior, is that it is not worth 1 rupee or even 99 paise, but rather the 33 paise that it is selling at.
The established players - and occasional well-behaved newcomers - are buying at (say) 33 paise on the rupee.
The "1 rupee" is what the business would be worth, in a highly efficient, open market. Which this market clearly is not. And the regulars are quietly colluding to keep it that way.
The context of _rm’s post is not about the OP’s dad’s specific business in its specific regulatory environment which may or may not constitute a “highly efficient, open market”.
From this, I get the sense that _rm was talking about owners of niche businesses that are surprised to find a smaller market of interested buyers, and hence are surprised they cannot sell their business at a price they hoped to get.
My point was simply that just because a seller cannot get a buyer to pay the price they hoped, that does not make the buyer a “bad” person.
Quite true. And it's possible that (due to regulatory/tax/social/etc. factors in India) small businesses could only be sold at large discounts to their "Wall Street theoretical" values - even in a perfectly efficient market.
I originally commented in response to amadeuspagel saying "If there's a whole industry of them, shouldn't there be lots of competition to buy these companies?" - by pointing out a simple way in which the market could be very inefficient.
Yes, even if there's a carved-in-stone rule that businesses sell for (say) 10X their annual profit, there will be plenty of business owners who imagine that their business is somehow the exception.
Related is the problem of owners misrepresenting their businesses to potential buyers. Which would lead perfectly rational and honest buyers to offer them far below 100 paise on the rupee, due to the risk of being swindled.
A whole industry of bottom-feeders buyers, but the companies they are buying are not necessarily in the same markets as each other, at all.
Why are the buyers referred to in derogatory terms? By the same logic, the seller should also be referred to in the same derogatory terms, for holding out for too high of a price.
Or one could do the sensible thing and leave emotion out of it, and realize business is just business. The market price is the price that results in a transaction.
Because they are taking advantage of the owner's impaired judgement due to their personal situation/ill health in trying to extract an unfair price. Such behavior is referred to as "morally reprehensible" at best, and is skirting the legal line of what would be considered a contract made under duress at worst.
So no one should ever buy from someone who is dying or ill?
That’s crazy. Supply and demand curves are in constant flux. The seller didn’t like the market prices when they were healthy, that does not mean they are entitled to a minimum price. Everyone gets ill and dies eventually, and everyone knows it. They are free to sell before that at the market price.
I think you are assuming way too much - a lot of older folks sell things "because they are done", and much is upside from when they purchased or started originally. Even when they are ill, many folks just don't care enough about the money enough to wait it out, negotiate, etc.
Easy to see how specifically targeting the dead or dying for profit is worthy of derogatory terms.
If you think otherwise, maybe you shouldn't view "bottom feeder" as derogatory? They keep the seabed clean do they not? It's all just "business".
And yes, the sellers in this case are also in the wrong, best case being bad luck, mid case being failure to prioritize, through to ignorance, delusion, stubbornness, arrogance, etc.
Yeah his father probably had been receiving lowball and unserious offers for years if one were to find the right email folder
I'm not commenting on OP or their family business, but a multiple of 2x or 3x could be more than fair for a hands-on small business.
Consider that there are large public companies with established management systems that you can buy and hold, completely hands-off, for multiples of 5x - 10x. GM is trading at 5x, lots of banks are in that range, huge equipment rentals, mines, etc.
Hi - author here.
This is a big question tbh and the lack of a succession plan is a function of many things:
1. This was my dad's baby. He loved the engineering and the science of it and so the idea of retiring from it was difficult for him to conceive. Doing that also requires thinking about one's mortality which I also believe was difficult for him.
2. This was a small market business in a tier 2 city in India. Attracting talent that could take it over was challenging. And myself and my siblings having been born and brought up in the States and being utterly clueless about the engineering/science of the company made us a non-starter.
3. As others have pointed out, he was thinking about succession/exit because he knew it was required for the biz to live on and grow. But life unfortunately had other plans and he was taken away from us unexpectedly.
There are definitely lots of could haves, should haves, would haves, etc I've thought about afterwards, but this was clearly one of those "play the cards you're dealt" kind of situations.
Thanks for reading.
Thanks for writing a great article.
I was honestly impressed with how much you cared for your employees.
The American way would be to just sell it to the highest bidder without any concern for anything else.
Does India have a different social contract? I'd never expect a company to actually look out for my best interest.
It seems like you really cared for your team. Are lifers common in India?
Back in my grandpa's time, you worked at the same place for 20 years, they gave you a gold watch, and then you retired.
Now your expected to jump ship often or your leaving money on the table.
Thank you.
I don't think there is an Indian social contract but having been born and brought up here in the USA, I'd be talking out of my a$$ on that topic :)
This was maybe more of an implied or expected contract I had with my dad and mom who built the business and by extension the Atlas team.
Job hopping is quite common in India, but that's probably more common in larger cities. In a tier 2 city like where my dad's business was, there are limited options for a plant engineer for example, and as far as I can tell, the skills they have in a fine chemicals plant may not be immediately transferable to a plastics manufacturer.
And finally, many were with my dad for 10+ years so probably some amount of comfort in knowing the domain, the job, the boss, etc.
Thanks for the story and for putting the employees first. M&A of your sort should always select suitors based on chemistry fit - so when I read your list of candidates, it was already clear to me you would sell to the one listed last, and I'm glad it worked.
Selling to Private Equity is almost never what any founder would have wanted, as their job is to slice and dice, "cut the fat" and sell the pieces to different highest bidders.
Lifers are common in manufacturing/industrials in India. Jumping ships is the norm in tech as it is in the US.
There are lots of family owned businesses in the US that look after their employees. I think it’s more that there are significantly fewer tech companies in general that are family owned businesses.
Thanks for sharing. Curious how things are now 6 years later: do you still keep in touch with some of the employees? Has the outcome been good for them?
This was a great ride, a very gripping read and a very touching story. Congratulations on your adventure and I'm sure your father and his second family is proud of you.
The Dad probably expected to live longer and run the business until then. Sounds like it was a big part of his identity.
Besides, most closely-held businesses don't have succession plans anyway.
This was in India where succession planning for small business is non-existent and if kids don't pick up their family business, it's over. However, even in America, this situation exists for small businesses. With so many baby boomers retiring from businesses like HVAC etc, their kids don't necessarily want to continue the business.
The author mentions that his father was in touch with a PE-backed chemical company a month before he passed, who re-engaged a month after- sounds like that might have been his succession plan?