Engaging 1 | An Unexpected Call
Engaging 1 | An Unexpected Call
Wow. The phone rings, and the world shifts on its axis. I was heading out the door and the call came in. Elaine, who manages our front desk and phones, was already gone and it just happened that I saw the call flashing and picked it up.
It was Dan Sumner, CEO and controlling owner of Sumner Ceramics, Inc., the leading producer of terra cotta roofing tiles in the country. Sumner wants to talk with us about acquiring us. Dan was blunt—as he always is—about his goals: “Mike, Sumner Ceramics has to grow or we’re going to die. The days of being a single-line manufacturer are over. We like you guys and you have a lot to teach us. You’re a perfect fit for us and we’d be better together, particularly with foreign imports taking a bigger share of our markets every year. I’d like to come see you later this week.”
I have to say, my head was spinning as I turned out the lights and locked the front door. I almost forgot to set the alarm. Sumner Ceramics—three generations of experience in terra cotta manufacturing; great access to raw materials; well-positioned to pick up market share in the West, where housing growth is still crazy strong. What would my dad, Charlie, do? What would my brother and sisters think? What would an acquisition look like for Owen Products, Ltd.? But most of all: What should I do next?
Amanda Owen Cooper
Just got off the phone with Mike. He’s asking me to call an emergency meeting of the Owners Council of Owen Products, Ltd. and said he’d be flying out West—would I host it? Something big must be up; Mike usually gets caught up in what’s going on at the company and forgets to touch base on Owners Council meetings until they’re right on top of us. He prefers staying East, too, so suggesting a meeting out here in the West is really unusual. I asked him whether he had called Martha (who’s co-chairing the Owen Products board right now) to alert the board, and he said this was a matter for the owners to discuss first. I said I’d call Martha and Christopher to schedule a meeting but reminded Mike that Christopher is out of the country at a nanoceramics conference for CombuSynth. Mike was unusually emphatic with me when he said this was more important. Then he hung up.
Martha Owen Jones
So there we were—Mike, Amanda, and me—sitting in Amanda’s law firm’s conference room, with Christopher, looking groggy, blinking at us from the video monitor. I had asked Mike why we couldn’t just meet at the plant office conference room, and he said it would stir up too many questions among the staff to see us all there. I haven’t seen Mike that on edge since his college days, when he was second-string quarterback and the first-string QB got injured before the biggest game of the season.
Mike quickly got down to business and recounted his conversation with Dan Sumner. We were all surprised—Dan knows our family well because he and our dad, Charlie, were good friends from way back when Charlie came out here to Western University to study materials science. Dan was one of the first people to call us after Dad’s death, and he offered to help us in any way he could. Dad used to say that Sumner Ceramics was the only player in the terra cotta industry he really admired. So, I was very surprised when Mike relayed Dan’s interest in acquiring us. We’ve thought of Dan Sumner as more of an honorary uncle, not a potential business partner.
I was worried something disruptive would happen at Owen Products. I mean, this is certainly an opportunity worth evaluating, but I’ve got all I can handle with raising a new round of investment capital for CombuSynth—and now Mike informs us that Dan Sumner wants to acquire Owen Products, Ltd. Figures I’d be in Japan at the Advanced Ceramics Conference: talking with my siblings in the middle of the night from the other side of the world is not an ideal way to make decisions.
We had a long discussion about whether to even meet with Dan. Mike asked whether we were violating our legacy by even thinking about this. Amanda trotted out some lawyer stuff about our duty to each other, the board, and the company. Martha surprised me by saying that we owe it to ourselves as owners of our Core Capital to take this offer seriously. What is the best choice for our Human Capital and our Enterprise Capital, not just our Financial Capital? None of my CombuSynth investors ever think this way, that’s for sure.
But we agreed to next steps:
- We—the Owners Council—will keep this matter to ourselves for now to preserve confidentiality and avoid anyone—Mom, employees, directors, family members—learning about the possible deal, and jumping to conclusions.
- Mike will meet with Dan to understand his objectives. Amanda will fly out to join Mike, since she is a corporate attorney and has taken part in plenty of acquisitions. However, we all agreed that she won’t be our lawyer and will bring in our counsel, Brian Clairborn, if we decide to go any further. She just has too much skin in the game to be impartial.
- Mike and Amanda will report back to the Owners Council immediately following their meeting with Dan.
I’m not sure what will come out of all this. One thing’s for sure: the future of Owen Products Ltd. is seriously up in the air, right now.
Be sure to check out “Engaging” under the Resources menu. You will find background on the Owen’s story, character bios, and company timelines to help you get the most out of your More at Stake experience.
Family Business Analysis
Thoughts on Family Dynamics – Governance – Strategy
Welcome to “Engaging,” our case study about the Owen Family and their family business, Owen Products, Ltd. Readers of my book, Engaged Ownership: A Guide for Owners of Family Businesses, will remember that fateful January day when Charlie Owen, the controlling owner of Owen Products, Ltd., died unexpectedly and left his shares in the company to his four adult children, Martha, Mike, Amanda and Christopher. At the close of the book, the Owens had learned the fundamental skills of family business governance, and were navigating the governance of Owen Products, Ltd. effectively. The hard work they put into building forums and effective meeting agendas; establishing a Shared Purpose, Vision & Mission; and other governance structures is paying off.
Of course, just when you think you’ve got it down, life throws you an entirely new pitch, and in Engaging, that pitch is Dan Sumner’s offer to acquire Owen Products. Martha, Mike, Amanda and Christopher have learned to govern an operating business, but a possible sale presents challenges they haven’t really considered.
Some of the key practices and disciplines that the Owens have developed as owners of Owen Products, Ltd. stand out in this episode, and they will help the Owens work their way through the opportunities and issues that Dan Sumner’s offer raises.
- Coming together immediately to share available information and consider next steps. The first thing that Mike Owen, President of Owen Products, does, is call Amanda Owen Cooper, the head of the Owners Council. This wouldn’t have been Mike’s first instinct in the months after Charlie Owen’s death—he tended to sit on information and try to make decisions on his own, as his father did. But Mike now recognizes that Dan Sumner’s inquiry is an ownership matter first and foremost, and so he reaches out to Amanda, to call a meeting of the Owners Council.
- Determining that the matter must be held in confidence. The Owens recognize the potential implications of Dan Sumner’s offer and agree to hold it in confidence. As you’ll see in future episodes, they take this commitment seriously. As a result, the risk of rumors in the plants and the wider industry will be kept to a minimum, and negotiations are less likely to be thrown off kilter.
- Recognizing conflicts and bringing in counsel. Amanda, chair of the Owners Council, is a practicing corporate attorney. Some families might want her to negotiate the deal on their behalf, but Amanda recognizes that she has too many potential conflicts as owner, sibling, and chair of the Owners Council, to take on the counsel role.
- Focusing on Shared Purpose and not jumping to conclusions prematurely. An offer for a family business is a dramatic and potentially life-changing event. It is very easy for owners to leap ahead and begin counting imaginary dollars. The Owens instead go back to their Shared Purpose and ask themselves whether selling even makes sense. Then, they agree—together—that as owners they need to take the offer seriously and find out more information.
Want to see more governance in action? Stay tuned for future episodes of Engaging.