Restructuring Family Business in UK: Nuances and Assistance

Family businesses, including in the UK, are a unique form of inherited entrepreneurship, preserving family traditions and values. Like any other type of business, family businesses in the UK face a range of challenges and issues that require restructuring to remain competitive and ensure sustainability. This process is managed by advisors who help identify the causes of crises, assess risks, and identify ways to resolve issues to preserve and grow the family business. In this article, we’ll have a look at restructuring services.

What is family business?

A family business is a type of commercial activity run by family members. The owners make key decisions about the company’s affairs and are majority shareholders.

This type of business has its characteristics: the family is the main link that unites all the partners. Family ties play an important role in developing the business, transferring knowledge and experience between family members, and shaping the corporate culture.

Family-owned businesses can be small or large and vary in ownership. In some cases, such a business can form the basis of an entrepreneurial dynasty, with each successive generation carrying on the work of the previous one.

In today’s world, a family business is seen as a popular and promising activity. However, it has both advantages and disadvantages.

The advantages of a family business

• A strong sense of cohesion and unity. Close family ties lead to effective management, which is beneficial when conflicts or problems arise;
• Business understanding. Most family business owners have a deep understanding of their business and bring their expertise to the table. This allows them to make informed decisions and develop the business in the right direction;
• Knowledge and experience transfer. Family businesses pass down knowledge and experience to the next generation, contributing to sustainable progress;
• Less bureaucracy. Family businesses tend to have less bureaucracy than corporations, making decision-making faster and increasing flexibility;
• Customer loyalty. Customers are more loyal to a family-owned business because they trust its values.

The disadvantages of a family business

• Disputes between business owners. They arise when there are disagreements over management, profit sharing or power relations. This can affect business growth and resilience;
• Unprofessional management. This leads to inefficient use of resources and makes the company less competitive;
• Emotional component. Business decisions can be influenced by family ties. This can cause conflicts and problems;
• Lack of independent expertise. Family businesses are often unable to apply independent expertise and resources. This limits their ability to progress and expand.

Family-owned businesses thus have advantages and disadvantages. In today’s evolving global landscape, understanding and managing these factors can help businesses achieve stability and success. A family-owned business must constantly improve and remain relevant as it expands and evolves, just like any other business. Restructuring can be used as a tool to achieve this.

Family business restructuring service: why use it and how it can help

Family business restructuring involves changing the structure of a business to improve its operations, increase productivity and improve financial performance. This process may include reorganisation of the company, reviewing business operations, altering the capital structure, and purchasing or selling other companies.

Reasons for Restructuring

• Death of a key family member, transfer of management authority to a new generation or the arrival of new members (spouses, children). Changes in authority can cause management problems as well as conflicts of interest. In such cases, an independent advisor can help assess the risks and resolve the nuances of succession;
• Market or industry changes. When the market or industry, in which the company operates, changes (e.g., due to technological advances, economic instability or new regulatory requirements), the company may need to adapt and restructure;
• Low efficiency and a decrease in profit. Restructuring can help identify and address operational challenges, such as a decline in profits, an increase in expenses or a loss of customers;
• Reallocation and optimisation of resources. Experienced consultants can help businesses simplify their resources by moving them towards more profitable activities or reducing them to less promising ones;
• Diversification and expansion. In some cases, restructuring may involve enlarging the business, incorporating new products or services, or exploring new markets;
• Under-investment. Advisors help businesses remain competitive, expand their potential, upgrade the equipment, expand the product range, and strengthen market positions;
• Reducing the tax burden or debt obligations. Restructuring can be vital for enhancing a company’s financial well-being, mitigating risks, and easing the tax load.

Advantages of restructuring

Business restructuring services offered by experienced advisors provide the following benefits for the company’s wealth:

• Improved efficiency. Companies can identify and eliminate inefficiencies, leading to cost savings and efficiency gains;
• Optimisation of financial performance. Effective resource allocation, fund reallocation and debt reduction, all contribute to the advancement of the company’s financial status;
• Increased competitiveness. Restructuring enables businesses to adjust to shifts in the market and develop innovative products and services, making them more competitive;
• Risk management. The risks associated with changes in legislation, economy or technological advances can be reduced through restructuring;
• Attracted investment. Improved financial performance and increased competitiveness may attract the attention of investors and bring additional assets.

Members of family businesses frequently face internal conflicts and struggle to evaluate risks and identify processes that require assessment. Moreover, owners will always have subjective opinions that may not match the actual needs of the business. Experienced advisors can review the situation, objectively assess the performance of the company, and deliver an unbiased evaluation. The key point is that professional advisors will help run the family business throughout a crisis and adjust it to market conditions to ensure efficiency and profitability.

Professional assistance: What to look out for?

Sometimes family businesses face challenges and struggle to find ways to save the business. It seems expensive to get legal advice but, in the end, companies risk not only losing their profits but also strong family ties. At an early stage of stagnation, it’s best to contact advisors to prevent significant material and personal losses. During hard times, consultants will help you find the optimal solution and protect your cherished family values.

Professional advisors offer restructuring services to affluent British families, with decades of experience in the field. They know how to address problems, considering the nuances of each family and its business. Therefore, they tailor their services to suit each partner and their individual needs. The basic services include:

• Assessing the financial state of the company and identifying the most effective reorganisation strategies;
• Developing a plan to improve financial performance and increase the value of the business;
• Helping implement the plan, which may involve the sale or purchase of assets;
• Developing a plan to take the business forward, taking into account the results and new market prospects.

We strongly recommend you contact legal advisers to discuss your specific case.

Business reorganisation is necessary to maintain and strengthen its market position. This enables the company to adapt to the changing external conditions, optimise resources and improve quality. With the right approach, restructuring becomes the key to growing and developing a business.