All in this together: How the extended family behind Booktopia is thinking about an exit

James Thomson Editor

All in this together: How the extended family behind Booktopia is thinking about an exit

Published 31 October 2013 10:12, Updated 31 October 2013 10:13

Somewhere among the possessions of Tony Nash, founder of Booktopia, is a journal the serial entrepreneur wrote in his 20s. In there is a line that reads: “One day in the future I would like to work with my brother and my sister and my sister’s future partner.” Amazingly, that’s exactly what happened. Booktopia is a true family business and Nash really does work with his brother, his sister and his brother-in-law, Steve Traurig, the company’s chief information officer. Nash is so much of a believer in the power of family that the business even includes his former partner, Angela Keil-Zippermayr, who is chief data officer.“I couldn’t even remember writing that,” Nash told BRW at a roundtable on family, succession and exits, which was sponsored by Australia’s top accounting firm for SMEs, Crowe Horwath. But there was obviously something in me that wanted to create something of value for the family. It’s a family business but we run it like a corporation. We’ve got a board, we’ve got a CFO, we’ve got a finance team. I think a lot of the things that we do are very, very professional and we’ve been able to attract amazing people.”

Just to prove the strength of the family ties, Nash surprised us by bringing Traurig and Keil-Zippermayr along to the roundtable, providing a rare glimpse of the family byplay at work. It’s a case study that challenges the stereotype of a family business. Traurig says there are “definite perceptions of the idea of family business”, with most people jumping to the conclusion theirs is either a mum and dad operation or a business where the family members rule the roost and slack off.

“One of the things that we’ve always said is that we are family, but we run a business. We get beaten up on decisions every day [by non family members],” Traurig says. Keil-Zippermayr agrees.

“I don’t think we are where we are because we are family. We have these jobs because we bring skills – otherwise we would be letting down ourselves and the business,” she says.

“We don’t rest on chairs and say, ‘well, I am the brother’ or anything. That makes us work harder.”

It’s the second business Nash has run with these extended family members, but he faces a looming issue. An exit from Booktopia is now on the cards and while discussions are at a very preliminary stage – Nash makes it clear that there could well be no sale – his and Keil-Zippermayr’s son, 10, isn’t sure on the idea. “I got harassed the other day when we started talking about our exit plan. He said ‘What? I want to work at Booktopia; that’s my first job!’,” Nash says.

Same page

Fortunately, there appears little doubt Nash and his family are on the same page in terms of exploring an exit.

That’s exactly what David Lilja, a principal in the tax advisory division of Crowe Horwath’s Melbourne office, likes to see when he talks to a family business. Understanding whether the family is of a single minds is the crucial first stage for advisers working with these companies.

“The first issue we look at is the dynamics of the family unit itself – recognising the different personalities and looking at what stage the more senior family members are in their career,” Lilja says.

“And then it’s about understanding what their motivations are and what their objectives are.”

Craig Dunstan, a serial entrepreneur and executive director at corporate advisory firm DH Flinders, advises small listed companies and family businesses looking to raise capital or undertake corporate transactions.

He says family businesses can be divided into what he calls “cottage” family firms and more corporate groups.

And while he jokes there can be red flags when dealing with family operations, he agrees with Traurig that it shouldn’t be assumed family businesses lack the processes, systems and rigour of non-family firms. “Non-family businesses are better at paperwork, but I wouldn’t necessarily say that transfers to being better at governance. There are plenty of listed companies with shocking governance,” Dunstan says.

However, he adds family businesses are about to enter a fascinating and potentially very difficult period over the next 10 to 20 years.

With fewer children prepared to take over their baby-boomer parents’ businesses, there is likely to be a glut of family firms on the market in the next few decades. And that means getting the exit right is crucial.

Exit strategies

Dunstan, who is best known for starting, listing and then selling property group MacarthurCook, has started another business (in addition to his work at DH Flinders).

He’s started up with his exit firmly on his mind.

“I think people are a bit more strategic about setting up a business than in days gone by. They think right at the outset, if I build this business, who can I sell it to? Who is going to be a natural buyer?” Dunstan says.

“Ultimately, if you do that your end price is going to be more attractive.”

It’s a point that resonates with roundtable participant Amanda Gome, publisher of BRW. She points out that it’s another reason to keep a close watch on the competition, who may one day prove to be your ideal acquirer.

“If you actually understand they might be your purchaser, you study their business and understand where you are strong, and are weak, and where you fit into that,” Gome says.

Dunstan says he has set up his business with independent directors and top-shelf auditors and accountants, so a larger business that wants to buy him out can do so quickly and easily.

“The large end of town can write cheques. You’ve actually got to understand the due diligence process and the approval process they need to go through. If you understand their buying process, and structure your business and run your business so that red flags won’t come up and its an easy process for them, logically you’ll end up with a better price,” he says.

Crowe Horwath’s Lilja agrees its crucial to get the structure right from day one. “It’s not about what works today, it’s what is right for the future and how do you put the infrastructure behind that.”

He says conversations about family business exits can be require some “strong and diplomatic” direction from advisers, particularly in the shadows of the GFC, which has changed some exit conversation. “It’s really about assessing where they are at and whether they’ve still got the energy to keep pursuing their goals,” Lilja says.

“But on the flipside there is a group of businesses that think we’ve got through that tough period, now let’s see what the opportunities are.”

Tough market

Nash is currently on both sides of the equation. He also has family businesses coming to him to investigate if Booktopia can buy them out.

He’s not really in the market for acquisitions, but he says many of these business owners are in a bind – they’re hoping their businesses will be their superannuation payouts, but it’s a tough market to sell into.

“They are looking for the payout they can possibly get,” Nash says. “I think a lot of them are going to end up saying ‘no buyer, we’re going to have to wind up’. Because they are never going to get the value they thought they would.”

His own exit plans are also somewhat uncertain. He says a potential buyer could come from anywhere – an overseas player looking to enter the Australian market, or an Australian retailer looking to bolster its operations – and the timing isn’t pressing.

It seems Nash will be ready. The company is now large enough that is needs to be audited, adding to the range of sale-ready external advisors that Booktopia uses.

However, he’s taking a pragmatic approach. “We rarely talk about exits with the team, because what does that mean to them? We talk about creating value. The more value the business has, the more options we have to sell it at a good price – or not.

“The fact that we are family does bind us that little bit more. The extra effort – the weekends, the holiday periods – we know that we are going in to create value.”