Family transition was key to Gibble's brand acquisitionOutline roles of former owners early, execs say
When one family company buys another, the deal might go smoothly because of the similarities in their family management cultures.
But afterwards, there could be problems in the company if leadership transitions for members of the former owning family are not spelled out clearly in a deal, executives and consultants said.
"It's hard to sell something that's been in your family," said Eldon Dieffenbach, a Berks County businessman who last month acquired the Gibble's brand of snack foods from Franklin County-based potato-roll-makers Martin's Famous Pastry Shoppe Inc.
Dieffenbach, 36, has spent the last five years building up a stable of businesses that includes recycled wood products, an electrical contracting company and an information technology services firm he started this year.
"If you look at my résumé, it looks like I'm a guy who just goes around buying companies, but it's a little different than that," Dieffenbach said. "I love working with people and putting teams together."
His family owns Dieffenbach's Potato Chips Inc. near Womelsdorf, Berks County. In 2006, he transitioned out of the family business and in 2007 acquired electrical contractor Blatt & Myers Inc. based in Myerstown, Lebanon County. It was his first acquisition of another family business.
When you're going into that kind of deal, it's important to research the operations, talk to the people and learn about the business's strengths and weaknesses, he said.
That due diligence prepares you to continue building the business. It also give you a sense of whether there can continue to be a working relationship with family members who formerly owned a company, he said.
If you have two strong-willed leaders, there will be problems, Dieffenbach said. It's often better if one takes over and the other goes to do something else. The problem is that the former owners are still emotionally attached to the business, he said.
"I look to come in and be understanding and gracious with that," Dieffenbach said. "But you need to balance that and need to make changes to be successful."
Problems with former owners who remain in a company after a sale can lead to problems with managers and staff who are loyal to their former bosses, he said.
"You're better off coming in with your management being loyal to you," he said.
Whether former owners stay on after a sale needs to be agreed upon as part of the deal, said Cheryl Young, a business consultant with the Shippensburg University Small Business Development Center.
Having an attorney craft those agreements is critical to avoid miscommunications and legal problems, too, she said. New owners also should think about whether they want a noncompete clause to be part of the deal. That provision keeps former owners from opening a new business directly in competition with the former one in the same markets.
But many times, someone from the previous company ownership remains with the company to guide it through the transition phases, Young said.
"If the buyer wants things to stay the same, it's probably good to keep the former owners on to maintain that status quo," she said.
In the case of Gibble's, selling the brand to Dieffenbach was the right move on several levels, said Scott Heintzelman, Martin's Famous Pastry Shoppe's vice president of finance and administration.
"It's not just the family, but the people who work there, too," he said.
The company had considered shutting down the snack food division when it decided to concentrate on breads and rolls, he said. But Gibble's employed a lot of good, loyal workers. It was concern for them that persuaded the Martin family to sell the brand to Dieffenbach.
"We didn't want to hurt people and the community," Heintzelman said. "It wasn't easy."
Dieffenbach's experience in family business and snack food also made the deal a good one, he said. The Gibble's brand is a family legacy, because owner Jim Martin's wife was formerly a Gibble. So emotional attachment was something they had to work through as well.
The sale to Dieffenbach ensured the Gibble's name would live on and be managed by a like-minded, family-oriented owner, Heintzelman said.
"Often, family businesses are sold to a larger roll-up kind of company, but we didn't want to do that, just be part of a national snack food conglomerate," Heintzelman said. "(Dieffenbach) is cut from the same cloth."
The Gibble's deal was a good buy because there was large agreement on those issues, Dieffenbach said. Now, he said, he's working to upgrade the factory near Greencastle, Franklin County, with new equipment and technology and planning to reopen the outlet store.
Plus, the Martins didn't want a heavy hand in the company after the sale, he said. That avoids issues of competing management.
"One thing I don't like to do is go in and say, 'It's my way or the highway,'" Dieffenbach said. "If you take the appropriate amount of time with due diligence, you can go in and talk to everyone and make it work."