Succession planning for pet food companies

If a pet food company is family owned, with no successors, is it in the best interests of both the company and shareholders to find a compatible buyer?

Part one of a series: The exit from Feed Your Pet Inc.

Justin Case has reached the top floor of Feed Your Pet Inc. (FYP) and is now a board member with the title of CCO (Chief Commercial Officer), responsible for sales, marketing and R&D. JoeZweiful, chairman of the board of directors, wishes to have a confidential chat with Justin.


Joe: I’m glad to have you on our board. And so are the other board members. And certainly also the shareholders – family and external ones alike – appreciate your contributions. You promised to rock boats and so you did – very successfully, if I may say so. But there is something I wish to talk to you about which is highly confidential: the family and other shareholders are playing with the idea to sell. It’s still very hush-hush, outside the group of shareholders only I and now you know about these thoughts.

Justin: First of all, thank you for your compliments and trust. And I expected an exit, but not so soon.


Joe: Well, neither did I, but there is no succession in the family and the non-family shareholders are not getting any younger, either. They want to free up cash to invest in a new venture and to enjoy the rest of their healthy lives. Probably in milder climes, a deck chair and dry martini at hand. I do understand their position, but at the same time I do not look forward to a period of unrest which always is there when a pet food company is on the block. Do you think that the shareholders are taking a wise decision? Mind you, a final decision has not been taken yet. Not by a long shot.

Justin: If you say that they wish to hear the opinion of the board, let’s formulate our opinion. Does this mean that the other board members will be informed as well?


Joe: That is not what I plan to do. It’s too early to bring it out in the open. Even if the information is embargoed, there are chances of leaks.

Justin: So it’s just you and me then. How do we deal with that?  The last thing I want to do is to affront my fellow board members; but I trust you have already thought about this.


Joe: Yes, I have. Leave it to me not to step on any toes. In our deliberations, we must be as objective as possible, which is going to be difficult because the company, the associates, the brands and everything else are in our hearts.

Justin: Sure, that will definitely cloud our judgement a little. And let’s not forget that also we are being taken out of our comfort zone.


Joe: As long as the shareholders and we are aware of that, we have mutual understanding. I think that one of the first things the shareholders will be interested in is the valuation of the company.

Justin: Of course that’s important, but it’s by far not the only thing. If you sell your baby, you want it to go to caring hands. So, it’s also important to decide what the buyer should be made of.



Joe: I think you’re right. We need to make this very clear to the shareholders. And we can then only hope that they understand and act accordingly. By the way, if the shareholders finally decide to sell, it will probably be up to me to find the buyer. I want you in on this, because you are the one that gave the company its new and successful direction. You’re the one who is best placed to explain what we did do to come to where we are now.

Justin: Thank you for another vote of confidence. We need to define what is best for the shareholders and for the company, to see if these two are compatible. And if not, how far are they apart? This is, in my opinion, the only way to approach the question. Just focusing on one side is not satisfactory and doesn’t give answers to key questions. And there is something else we need to consider. The family shareholders have a different makeup than the non-family ones, who came to the scene at a later stage. Different emotions and perceptions will play a role in this process.


Joe: I follow your thoughts. The shareholders as I know them are not the ones to say, let’s take the money and run. They will wish to be assured that the company goes to caring hands. And that partly defines the profile of the suitor.

Justin: Let’s do the following: if you put your thoughts on paper about the shareholders’ interests, I will do the same about the company’s interests. And shall we then meet, say, a week from now to compare notes?


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