August, 1988

Fruits of Thought

Selling The Family Business

When my great-grandfather Jacob Prevor arrived in New York at the turn of the century, he carried on in the tradition of his family and opened a wholesale produce business under the name J. Prevor, Inc.

My grandfather Harry Prevor operated in the produce industry for many years, under several company names. For the longest stretch, he was an auction buyer, then a receiver and wholesaler operating as Harry Prevor, Inc.

At the end of June 1988, my father and uncle, Michael and Sydney Prevor, operating as Prevor Marketing International, Inc., sold their company to U.K.-based Polly Peck International PLC for a $12 million up-front payment. In addition, members of my family received employment contracts that provide both salaries and a share of the future profits.

The sale of a family business is almost always a bittersweet experience for the family involved. No matter what kind of deal you make for the sale, no matter what the reasons for the sale, no matter how fine the people who bought the company, you cannot help but feel a bit wistful when you remember that you built this business with your own hands. It sustained your children in their youth and your father in his old age. It put bread on the table and college diplomas on the walls. It provided the sustenance that paid for weddings in times of joy and funerals in times of grief.

And indeed there are questions that have to enter people’s minds when they contemplate the sale of something with which their lives have been entwined for so long. There are personal questions because a family business is often the nexus within which the whole family relates. Will selling the business cause the family to break up? What about obligations to future generations? The family business has for decades provided the next generation an opportunity to earn a living. If they were clever and hardworking, there were few limits to how they could build the business. In selling the family business, are we selling out the next generation?

In some situations, a decision to sell is easy. If a family has no younger members interested in the business, an older owner looking to retire sells out because there is no point in leaving a produce business to heirs who don’t want to run that business or don’t know how. But in my family’s case, the president of the company, my brother, Barry, is only 25, and we have a number of younger Prevors growing up fast. In the end, I suppose my family decided to sell out to a much larger organization because they recognized that both the produce industry and the family position have changed since Jacob started selling fruit so many years ago. In fact things have changed so much that my brother may make more money and have more fun working for this larger international conglomerate than he would have owning the business.

The family’s position changed because the business grew. As a result, opportunities began to present themselves that would strain the available resources. It is a funny thing, but success brings with it its own problems. If once my father’s problem was whether he could get an order for 50 pieces, recently it became a question of whether to finance millions of dollars in overseas receivables. It’s not necessarily that the people weren’t good for the money. Usually they were. But what percentage of your money would you like to have floating around on the ocean on a bet that the Minneolas will arrive in top condition after 45 days on the high seas? Now that my brother and father are working with people who have both deep pockets and a commitment to the business, maybe they can analyze each proposal using a rational cost-benefit analysis. Before, the fundamental problem was that to fill the big orders, my family was forced to place too high a percentage of their net worth at risk.

But if my family’s position has changed, the business has changed more. The international trade of produce has become such a big business that it has attracted big players, and as big players are wont to do, they have raised the stakes. When I used to spend my days buying and selling produce, I would get us deals to market foreign produce in North America. We had a lot of advantages — a good reputation, a solid credit rating and a record of providing good returns to our shippers — and frequently people came to us because a friend or associate had had good dealings with us. But over the years, all these factors became less important. What became more important was money. It became a scenario in which we could get all the Chilean grapes we wanted in January — if we would fly down to Chile and advance people millions of dollars. My melon man in Central America seemed to misunderstand the fact that we were marketing agents. He thought we were his bank. Every day it was something else. Would we pay for the boxes, the seeds, the fertilizer?

The Polly Peck Group is not very well known in U.S. produce circles, but they will be. They are a substantial international organization with interests in hotels, electronics, housewares and clothing, just to mention a few items. They are also major players in the international produce trade. In the produce trade of Turkey and northern Cypress, both Polly Peck and Asil Nadir, the company’s chairman, have the finest reputations. The company and the man are spoken of with a veneration that is testimony to the quality of what Polly Peck has done with Turkish produce.

Turkey has long been a land of fantastic agricultural potential, and Polly Peck has acquired the lead in the Turkish produce industry by bringing the most modern of growing, harvesting and packing techniques to this rich land.

Today Polly Peck is expanding. They recently purchased one of the big auction houses in Rotterdam. They own citrus packing facilities not only in Turkey, but also in Spain and Uruguay. They have a fleet of 10 ships to move their produce, and though they have a big organization, they have not lost the entrepreneurial spirit with Asil Nadir at the head.

For myself, I think my family made the right decision in selling. I had seen my father torn one too many times. When the big orders came in, he didn’t know whether to applaud the business or curse the risk and financial burdens. I think he can enjoy the business more now. I think it was a good deal for my brother as well.

One of the problems with being in a family business that has had great success is that nothing you can do can make the family affluent; you can only make them poor. Now my brother is free from these burdens and can use his genius to build the biggest company in the world. Personally, I think Polly Peck got a great deal as well. They acquired an instant distribution arm for their worldwide produce operation. They bought established trade connections and a respected name in the business. Perhaps most of all, they got a management team in place with a lot of savvy and experience in the produce industry. I figure they are a big company and they will look to buy others. The first $100 million company they buy, my father will get it for them for 20 percent less than they would have paid. So I figure they got his company for free.

But though it was the best thing for everyone, I confess I’m glad that I grew up when my father still owned the company and was working for himself. It’s not that there weren’t lots of sacrifices, because there were. Building a business takes a lot of time, and I think my brother and sister and I paid to build that business with a lack of contact with my father. Nonetheless, I cannot think of a better way to grow up than to be the son of an entrepreneur. To go into the office and see his name on the building gives a child a set of roots. Having something of his own makes a boy feel like he has a secure place in the world. Yet an entrepreneur’s child also gets a sense of wings. In the whispered moments when my father opened his supermarkets years ago, there was surely the thought that we would build another Safeway or Kroger or A&P. The fact that it didn’t happen was surely far less important than the fact that the achievement of such goals was attempted. I was taught that to work hard in pursuit of an ambitious goal was admirable, not foolish.

When I launched PRODUCE BUSINESS years ago, I thought I did it because I wanted to do something different from my father. I now understand that I wanted to do the same thing. I wanted to create something of value, something that would never have existed in the world had I not created it.

It is this creation of something that is the point, and that is why selling a business is the ultimate entrepreneurial act. It is an acknowledgement that someone else values what you created enough to pay for it. It is the vindication of a lifetime of work.  pb