Representing the third generation of the family at Malley's Chocolates, CEO Mike Malley said what motivated he and the rest of the family to even think about a transaction — which ultimately became a recapitalization by Promise Holdings in late 2022 — was a lack of alignment among the six siblings.
"So, for all of you out there who have brothers and sisters, I don't know if you work with them or not, but you can imagine what it can be like trying to get everybody to get on the same page about what we want to do with the business," he said at this year's Cleveland Smart Business Dealmakers Conference. "Whether it's investing some more capital to build out the factory or expand the retail footprint or hire other personnel, we just couldn't really get on the same page."
He didn't think there would be a buyer for the business, he says, on his assumption that Malley's is just a local chocolate shop. But an encounter with an M&A professional at an event led him to appreciate that he might have more of an asset than he initially thought.
He took the idea back to the family, and there were doubts. But they went through an internal due diligence process and had some brokers assess what they thought the business might be worth, which got everyone's interest.
"We really wanted to make sure the family would stay intact," Malley says. "That was the primary goal. That was the goal of my parents."
Malley worked outside of the family's chocolate company for about 23 years. So, when he came back into the business, he was bringing a different perspective. He saw how other companies function and operate with their organizational charts and their accountability. It was much different than the essentially flat authority among the siblings in the family business.
"You can imagine trying to run a company when you have six equal voices, and there's not an alignment," Malley says. "And when we went through the process, one of the potential suitors of the company was asking us a lot of good questions, and he finally said, 'You know what I think your problem is? It's your company's being run by committee.' And I thought that was a good depiction. And what concerned me when I said the lack of alignment, it's the old expression, you're either growing or you're dying, and we were just kind of plateauing. And I was concerned, like, at what point is the business going to start to implode on itself if we're not going to properly make the right investments — whether it's people or equipment or whatever we felt that the need was? And then to compound all that, there wasn't alignment on whether or not the fourth generation would come into the business."
That, he says, brought into question the succession plan and the exit strategy.
"I don't want to get taken out of here in a pine box," he says. "We don't really have a plan. And if we're not going to bring the fourth generation or groom them to come into the business, how are we attracting outside management personnel to come in and help us take the company to the next level? So, we had all that sort of marinating in the soup, and we were like, nothing ventured, nothing gained. If we're all in agreement, let's try to see what the market would bear, and let's sell it, and again, keep the family together."
The family went to market with the company in the fall of 2019, and by January 2020 had an interested party that they planned to move forward with. But COVID hit during due diligence and stopped the process. Then an adviser confided to Malley that some of the siblings seem to have checked out of the business and were already thinking about what they want to do next. But in order for the eventual sale to be successful, they needed to keep running the business.
So, in the fall of 2020, two siblings took a buyout from the family. By 2022, the family was ready to go back out to market and they had a successful transaction. With four siblings left in the business, two decided to step away, saying they were too used to being their own boss. That left Malley and his brother still in the business day to day.
Now that the transaction is over, Malley says he wants to stay as long as they'll have him.
"I like to think of it as we're third generation, and I want to see what Malley's Chocolates can be with 3.0," he says. "They're infusing money into the business. I'm able to run the business a little bit more the way I would like to see it. So, I'm excited about what the future holds."
He knows, however, that they acquirer could easily make a change and he'd no longer be in the business. But from all indications, he says they still seem to be very positive about the impact he's having. Still, some of those around him are asking why he's still working.
"It's fun right now," he says. "I'm still working very hard and long hours, but they're fun hours. And I'm starting to bring in more professional folks that can free me up to do some of the things that I feel more comfortable in doing — whether it's the branding or the sales and marketing or being the face of the brand or being with all the employees. But I was given some advice, because I keep thinking like, I got to carve some time out to think about what's the next chapter. And whether it's right or wrong, someone said you're so busy working you're not going to have the time to think about it — whether you just say, OK, I'm done, or go semi-retired — and then give yourself some space to really figure out what it is you want to do. So, whether that works or not, but I'm having fun, so I want to stay."
