Lessons Learned: Selling a Third-Generation Family Business

Two brothers never expected to join the business founded by their grandfather—which survived a family falling-out—but their dad’s health problems led them back into the fold, and led the company to greater expansion and eventual purchase by a competitor.

Rob Johannigman

Rob Johannigman was a Co-Owner and Executive Vice President of Loveland Pet Products, a third-generation family owned business. He relates the story of the company’s founding by his grandfather, the contributions of family members in the second and third generation, his own career and the sale of the business.


Stranberg Resource Group: Loveland Pet Products, your family’s business, was founded by your grandfather. Tell us about the history of the business.


In the early 1920s, my grandfather Joseph “Jo-Jo” Johannigman, bought 22 acres of land in Loveland, Ohio with the intent of raising ornamental water plants and koi fish for water gardens. In those days, it was fashionable for wealthy homeowners and businesses to have indoor and outdoor water gardens and Jo-Jo decided to cater to this popular and growing market.


He developed a retail business for the local market and eventually expanded into wholesale, shipping plants and fish by train and plane to water gardening retailers around the country. He named his business Loveland Goldfish Farm and Aquatic Nurseries.


As the business developed, Jo-Jo became one of the first regional distributors for Hartz Mountain—a leading U.S. pet product company at the time—a move that enabled further expansion of his business in Ohio. As dime stores added pet departments and pet stores began to spring up around the Midwest, he became established as the main wholesale supplier of both livestock and dry goods to retailers in the Midwest.


My father, Bob Johannigman, was born in 1924, the same year that Loveland Goldfish Farm was incorporated and published its first catalog, which continued to be published until we sold the business in 2008. He officially joined the business as Vice President in 1947. He married my mother, Lois, in 1949. I was born in 1953, the same year that Jo-Jo died. My brother, and eventual business partner, Roger, was born in 1954.


Following Jo-Jo’s death, my father became president and purchased the business over the next 10 years from his mother, Claire. In 1955, Bob’s younger brother, Bill, also joined the family business as Vice President.  Jo-Jo’s sons continued transforming the business into a full-line wholesale distributor, changing the name to Loveland Pet Products in 1959.


When my uncle Bill joined the business, my dad retained majority control, keeping 51 percent of the ownership and giving Bill 49 percent. He understood the risk in doing business with family members and he wisely required Bill to enter into a buy-sell agreement. Following a difficult falling-out between the brothers in the mid-1970s, Uncle Bill left the business and Dad exercised his buy-sell agreement, buying Bill’s shares and getting 100 percent ownership back.


My brother Roger joined the business in 1979 and became president in 1983 when Dad decided to work part-time after struggling with several health issues. I joined in 1989 as Executive Vice President. Roger and I continued to expand our delivery area through four acquisitions and taking on new brands. We added on a second warehouse, three more branch distribution centers, more trucks, more people and more inventory.


In 2008, a large competitor approached us with an offer to buy our company that included five-year employment agreements for my brother and me to stay on as Vice Presidents and eventually take over the top management of the acquiring company as the current owner/President transitioned into retirement over the next few years.


Unfortunately, things did not turn out as planned. The company’s owner was reluctant to turn over his second-generation family business to us and changed his mind after several years. Roger and I both left the company and went our separate ways, pursuing other new opportunities outside the pet industry.


SRG: Neither you nor your brother joined Loveland Pet Products immediately. What is the story of your early careers, and what led you to join the family business?


Growing up in Cincinnati, my brother Roger and I worked several summers and many weekends in the family business helping with odd jobs. Neither of us had any ambitions of working with our dad in the family business. We were quite fortunate that our parents could afford to send us both to private universities to earn our undergraduate degrees.


I graduated from Notre Dame in 1975 and got married in 1976. My wife and I moved to Chicago to attend graduate school at the University of Chicago. Two years later, after receiving my master’s degree, I started my career as a consultant with Arthur Young & Co. in Chicago. (Arthur Young was an accountancy firm that later merged with Ernst & Whinney to create Ernst & Young.) My next move was to one of Arthur Young’s clients—Molex, a manufacturer of electronic, electrical and fiber optic interconnection systems—working in sales and marketing. While with Molex, I spent four years on an assignment in Singapore. Shortly after I returned to Chicago in 1988, I was offered another foreign assignment in Sweden. While preparing to move to Stockholm, my father had several health setbacks and asked me to move back to Cincinnati so that I could join him and Roger in the family business. It was a difficult decision to leave Chicago and my successful international career with Molex, and to turn down the Stockholm opportunity, but my wife and I decided that it would be best for our two children to put down roots in Cincinnati alongside our extended family. The business was doing well so I joined in 1990 as Executive Vice President.


Roger graduated from Harvard in 1977 and worked for two years in Washington, D.C. for our uncle, who was a U.S. Congressman from Cincinnati. Roger joined our father’s business in 1979 as Vice President. He worked closely with Dad to grow the business and expand it into premium pet food distribution with brands such as Iams and Hill’s Science Diet that were being sold exclusively through independent pet stores. This new “healthy” premium pet food segment was growing quickly, and their warehouse was running out of space. So, in 1989, they built a new state-of-the-art warehouse facility a few miles away in Mason, Ohio and moved the business to the new location.


SRG: What was learned as Loveland evolved into a G3 business?


When I joined my father and brother in 1989, I asked that as a condition of my employment that we establish an independent outside board of advisors. We received advice and input from John Ward, founder of the Family Business Consulting Group in Chicago, about best practices in setting up an outside advisory board. His advice paid off and our board was instrumental in keeping us accountable and on-task as we formulated our business plans and strategies over the next 18 years. They helped us make key decisions, including selling the business.


Given that neither Roger nor I thought that we would wind up in the business with Dad, and also that we had outside business experience prior to joining him, working at Loveland did not seem like a birthright or something to which we were entitled, but rather as an excellent business opportunity to be embraced and developed to its fullest potential.


SRG: How did you, your father and brother work together? How did you manage disagreement and conflict?


Dad, Roger and I had a great open and honest friendship that we cherished very deeply. We were all very respectful of each other’s feelings and interests, and we developed a decision-making process that worked well for us. Basically, if one of the three of us did not agree with a key strategic decision, then we would not move forward on it. We agreed that the business, our friendship and the more than 100 people we employed and for whom we were responsible were more important than any single one of us. This was something that we discussed often and made efforts to consciously promote. As a result, our employees were extremely loyal and hard-working. Our turnover was far below the industry average. They loved working for a family business with owners that cared deeply for them.


SRG: For many family enterprises, selling the business is a non-start “over-my-dead-body” issue. What was different about your family’s relationship with the legacy of Loveland Pet Products?


Our dad was great about letting go of his control of the business and pretty much went along with anything we suggested. He was a very practical guy and loved his business, his sons and his employees deeply, but at the same time he understood that industries change. As the independent pet store market continued to shrink due to competition from large national retailers and e-retailers, our sales, margins and profitability were eroding to the point that we had to seriously consider our options to stay viable. In wholesale distribution, economies of scale are critical, and we knew that we had to grow quickly and diversify or be trounced by our larger competitors. When we sold the company, we viewed it much more like a merger than an acquisition, and we welcomed the opportunity to run the combined companies for our new owner without having to shoulder the economic risk of ownership. It seemed like a win-win for everyone and our dad was pleased.


SRG: What advice do you have for family enterprise leaders who are facing circumstances where there is conflict between the needs of the business and the needs of the family?


For starters, frequent, open, trusting and truthful communication among family members is critical. This cannot simply be left to chance. There needs to be conscious effort to periodically obtain inputs from the key stakeholders on the current state of and future plans for the business.


Secondly, having an effective outside advisory board that you take very seriously is also of key importance. These board members need to be people that bring value and knowledge to the table and must be carefully selected. The membership should go beyond immediate family, friends, personal lawyers and accountants and include a diverse group of advisors from a cross section of backgrounds and experience.

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