Freedom Communications, Inc: Family Enterprise or Liquidity, Case Study Example


Freedom Communication is a family media enterprise that is operated on very strong family cultures.  Raymond C. Hoiles (R.C.) a passionate voluntaryist and libertarian, founded the company.  The family ran company has been handed down from generation to generation to remain a family owned and operated company.  In 1982, the company sought outside help and the board appointed non-family executives as CEOs.  James Rosse was appointed from 1992-1999.  He supported the family business aspect and re-energized the family involvement.  He implemented the G3/G4 Family Issues Committee, or as referred to in 1998, the Family Council.  The company passing from family to non-family, back to family controls no relevance in the final outcome.

In August 2002 Rick Onckens, grandson-in-law of R.C, held a share-holder forum. One of R.C.’s grandsons Tim Hoiles who owned 8.6 percent of company stock was in favor of this forum.  Out of the eighty-two family members who were participating in this forum, forty-three wanted the opportunity to explore the liquidation options.  The family was not completely sold on liquidating the family company, they wanted to explore additional options as well.  The following were ideas that were presented:

  • Develop a company-facilitated ongoing market for shareholders
  • Sell the company to another media enterprise
  • Distribute a special cash dividend
  • Transfer operating businesses to different shareholders
  • Spin off the operating businesses to the shareholders (for possible future disposal)
  • Sell selected assets
  • Offer a one-time share redemption program
  • Sell some shares to an employee retirement plan
  • Create employee stock ownership (which had excellent tax advantages if more than 30 percent of the shares were sold to the employee retirement plan)
  • Sell some shares to an outside investor
  • Take the company public
  • Raise more capital through more debt

Money is a large factor when it came to the problem at hand.  The desire to keep it in the family versus the generous offers that were coming in.  More than fifty outside bidders showed interest in buying all or part of Freedom, resulting in twenty-six preliminary indicators of interest and ten formal offers.  There was definitely a division on what was the right decision in regards to selling.  Forty percent voted to sell, forty percent voted to keep, and twenty percent did not know what the best option for the company was.  According to CEO Alan Bell, .Selling is not necessarily the objective. The objective is liquidity. If you can get the people who want to leave to walk away with a fair price, that’s the goal. Tom Bassett analyzed the finances, then called a few of his fourth-generation cousins representing all three branches and told them, if we’re going to save the company, we have to do it ourselves.

There is no question to the profitability and value of the company.  In 2003, Freedom consisted of eighty-two family shareholders and owned eight television stations, several magazines, and twenty-eight newspapers.  This made it the twelfth biggest media company in the U.S. totally a value of 1.5 to 2 billion. Tim Hoiles one of the third generation owners had 7.8 million shares.  Dissatisfied with the business decisions being made by the CEO, he initiated the idea of liquidation.  Voting on selling to the highest bidder ended in 40 percent shares voted to sell, 40 voted to keep in the family, and 20 percent were undecided.


In selling Freedom Communications, Inc. it is important to consider certain questions as to the overall well-being of the company.  The shareholders were asked a series of questions to determine their views on the mission statement.  What are the pros of continuing the company as a family business?  The highest rated response in associated with the pros is family.  The next important was heritage.  And tied for third was employment and income.  The second question is what are the cons of continuing as a family business?  The highest priority is family politics.  The second and third respectively were lack of liquidity and slow growth.  What do you want the family business to be?  The highest priority was being profitable.  Second priority is the ability for growth.  Lastly is the opportunity for employment.  Lastly, what do you want from the family business?  The most important was income.  The second was a sense of pride.  And lastly, was employment for opportunity for family members.

Another question was what do you want your role to be in the family business?  The highest response was they wanted to be informed shareholders.  The next important is to be a contributor.  And the last two in order of importance was to work in the business and to be on a committee.   Understanding the direction and mentality of the employees, the following question sets a guide for their own growth thoughts.  What do you think Freedom will look like in five years? Realistically? Best-case scenario?  The highest answer was an internet-based business.  Second, they said the company would be bigger.  There would also be an initial public offering (IPO) and lastly a merger. 

            Freedom Communications, Inc. was a business established on the ideals of being a family enterprise based on five values.  R.C. believed that in order for a company to be successful they had to have respect for individual freedom.  This is what allows the employees to think for themselves and the right to think how they feel is best.  Self-responsibility which is the knowledge that every decision has consequences. The choice being made are to build up the community, one’s self, and one’s family.  The third value is integrity.  This is a personal code of value. It is within this value that one can develop respect for themselves and for others.  The fourth founding value is community.  This community represents human beings sharing values that have the understanding of a mutual respect for one another.  The shared commitment and desire for humanity is also equally important.  The community looks for guidance from the more experienced individuals in order to make the best possible decisions.  And the last founding value is life-long learning.  This is the commitment to continually learn and expand individual knowledge.  The success it was founded upon, however was not the success that occurred later as generations evolved.  Expanding the company to external shareholders and purchasers could provide new insight and additional income that is desperately needed continual growth.

Freedom Communications Inc. is a highly successful media company that is not in any type of financial need.  They have operated for many generations as a family owned entity.  There is a lot of pride that is associated with the work that has been put into the overall success of Freedom.  Selling for a high profit is not only unnecessary, it is an insult to R.C. and all the other family members who helped make the company what it has become. 

It is hard to disprove the family ties that exist in this business and how many individuals that includes.  However it is important to consider the bottom line when determining the best option for Freedom Communications Inc.  The proof lies in the board’s decision to hire CEO’s that were not a part of the family dynamic.  In 2002 Alan Bell, a non-family member CEO, took the company to a 15 percent profit simply by cutting costs and increasing profit. This figure shows that it is not necessarily the family ties that makes this company successful, perhaps it’s the business idea and ability that enables a 15 percent profit.

The biggest consideration is the fact that when outside executives were brought in for restructuring, the business still was family owned.  This means they owned the majority, and the family had the opportunity to have a voice in the event they needed it.  Liquidating or selling the company would take away the family’s ability to have a say in the company events that take place. Regardless of the money involved, there is still the ownership of a family business.  Handing the company over to a new CEO could possibly help them with a larger company profit while keeping it in the family.  Ultimately this decision is about the money associated with it, so exploring other options may be the best decision for the company.  

            As of 2003, eighty-two family members owned shares in Freedom Communications Inc.  The family breakdown consisted of ten third generation members, twenty-eight fourth generation and twenty-four fifth generation shareholders.  The company has had the shareholders be predominately family members since the beginning of its existence.  This was a big part of keeping ownership within the family.  However, without a liquidity option, there was no chance of getting out of the business while collecting the monies for the sale of shares.  There is a great opportunity for financial suitors to be able to recapitalize or invest.  The ability of external powerhouses such as Bell to come in and take care of business and exceed previous expectations is enough qualification to allow members to consider stepping outside of the family business and liquidate.       

            Since this is a family owned business, it is important to allow it to remain family owned and controlled.  Setting the value for liquidity and allowing family members the first option to purchase the shares being sold.  Next is to sell to outside investors so that the family member has the option to exit the family business if they so choose to.  By doing this, the shares will be valued and sold at a fair value and the family members have the option to cash in their shares instead of having ties to a business that they no longer choose to participate in.  This is a common practice in businesses.  It is possible that liquidity was not presented to the shareholders because of the founders desire to keep the business in the family.  However, if a family member no longer chooses to be a part of the business, it is within the best option of the company to extend the option of selling.  This is in the overall best interest of Freedom Communication Inc.                        The shareholders laid all factors out on the table to determine what the best possible outcome were for their company.  There was a lot of money being offered in order to take over the reins.  However, Freedom needs to keep the business in the family.  Allowing the family members who no longer want to be involved in business a chance to sell their shares to other family members before presenting it to alternative investors could allow the company to remain within the family and benefit everyone involved.