Business Succession in Turbulent Economic Times: The Hyatt Hotel Debacle and Other Lessons Learned From the Trenches Client Alert
August 31, 2011
In these tumultuous
economic times, your business succession plan is one variable you can control.
Why should you take action now? The upheaval shaking the family-owned
Hyatt Hotels Corporation during the past few years provides a cautionary tale
for all family business owners. The Pritzker family of Chicago, which founded
the hotel conglomerate, exemplifies the challenges faced when planning for
multi-generational business succession under difficult economic and political
The death of the
Pritzker patriarch, Jay Pritzker, and the resulting dispute between family
members, triggered a fire sale that has gutted the family's business holdings
during one of the worst economic downturns for the lodging sector since
September 11th. The disintegration of the family's business conglomerate, worth
billions of dollars, occurred despite the patriarch's clear intention that the
structure remain intact after his death. What went wrong?
- Failure to build consensus among the interested parties
as to the final result
- Reactive planning in the face of an impending health
crisis (or any financial, age, or market-related trigger)
- Dynasty trusts, while excellent tools for transfer tax
planning and liability protection, are not necessarily the best mechanisms
to manage family businesses in the long term.
- The fiduciaries, as the controlling executives of the
family business, awarded themselves excessive compensation
Traditional estate and
corporate plans with autocratic and restrictive management structures are no
longer sufficient to address the needs of business owners in the current
environment. Any business succession plan must retain the flexibility to
be updated frequently to address changing circumstances and family dynamics.
And an ongoing review of the plan, once implemented, is an absolute
If you have any questions about the
information presented here, please contact Patricia M. Annino, chair
of the Estate Planning and Probate Practice
Group at 617 456 8009 or pannino@PrinceLobel.com.