Freedom Communications, Inc:Family Enterprise or Liquidity? Case Solution
Possible solutions
The possible solutions available for the company that can be used to effectively deal with the scenario, currently being faced by the company are as follows:
The company can take the two approaches into the consideration, to keep the family business operating; they can provide a complete exit to the individuals who are not willing to be a part of the company or they can provide the individuals with the money who want to stay as a part of the business and seek for some personal funds. The company can adopt any of the option or a combination of both.
Most of the family owner wanted to leave the company because of the family politics and because they felt that their point of view was not respected and the decisions made by the CEO of the company were not aligned with the willingness of the other members.
Therefore the company can divide the ownership of the newspaper among the family members, selected on the basis of the majority of votes by the shareholders and allow them the right to operate the business according to their will. This will minimize the family drama and politics and will motivate the members of the family to stay in the company which will resolve the liquidity issue.
On the other hand the company can provide cash to individuals who still want to leave the company and want to cash out their shares by selling the ownership of the newspapers that are no longer much profitable to the company. This will benefit the company in two ways; it will resolve the liquidity crunch being faced by the company and it will also benefit the company by reducing the cost attached with the operation of the non-profitable business.
The third option available is to allow the shareholders to borrow against their shares by establishing the arrangements with the bank and providing guarantees for the loan. The advantage of this strategy will be that it will limit the shareholders from claiming their ownership in the company and will benefit the company by resolving the liquidity issue.
Conclusion
The company which was established with a strong family culture and values, rapidly expanded its reach and now has the ownership and the governance of the 3rd and 4th generations. But due to the lack of coordination and communication between the family members, the company had came across an issue where it had to decide whether to sell or keep the company in order to meet the liquidity demand. As a large number of shareholders have decided and are in the favor to sell the company in order to cash their shares because they no longer want to be the part of the family business due to the family politics and the dissatisfaction on the decisions made by the CEO, without considering the opinion of other shareholders. The best possible solution to deal with the issue by keeping the company’s values and its heritage intact is by allowing the shareholders to borrow against their shares by establishing the arrangements with the bank and providing guarantees for the loan. This will benefit the company by resolving the issue of the liquidity and will allow the shareholders who are in need of funds to borrow against their shares. In this manner the shareholders will be able to save the company from selling and yet they will be able to meet their objective of liquidity. Though this strategy has some potential risk associated with it. These risks can be minimized by allowing the shareholders to borrow against the 50% of the value of the shares.............
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