Succession Planning

For many owners, selling the business that you have spent years building can be an exciting but complex and worrying process. One of the biggest challenges you face is deciding who will take over the running and ownership of your business when you retire. It is particularly important to plan for your succession in good time to avoid leaving the company in a vulnerable position.

You may well have put to the back of your mind any thought of succession planning – like many business owners you may expect that when the time comes to retire you will be selling your business to someone in the same industry: a “trade buyer” who may well be a competitor.

However, achieving a trade sale on acceptable terms is becoming more and more difficult and there are other alternatives which should be explored. Choosing the right path is key. There are many options open to you if you are considering selling your business.

Selling your Business

If your company has great products or services, a strong management team, is independent of you, and has a compelling growth story, there may well be buyers who will pay a very good price for your company. The buyer may not necessarily be your competitor, but perhaps a supplier looking to secure its supply chain or someone wanting to enter a market for strategic reasons. Careful consideration needs to be given to any deferred payments or ‘earn outs’ in such deals, which are increasingly demanded by buyers fearful of acquiring a company that is not what it seems.

Management Buy-Outs

With external funding for acquisitions in short supply, successful companies are increasingly setting up arrangements which allow for ownership transfer “from within”. Your management team and/or prospective owners or investors can be brought in from the outside to strengthen the existing team in order to grow the company and to provide funds for a buyout (Management Buy-Ins).

Often though the management team are not in a position to raise the funds they need to buy the business. We have developed an innovative solution that overcomes this by structuring a deal that lets you stay in control and sell your company in a tax-efficient manner for a fair price. At the same time this structure and process gives your team (and perhaps new members of that team) a low cost way to become owners over an agreed period. We call this process the Vendor-Funded Management Buy-Out (or V-F MBO).

In essence, the key is to have a clear plan and a clear process that identifies and addresses different objectives and interests and reflects the strengths of the team.

Business Transfer to Family

As you started and grew your company it may have seemed natural to bring in family members to work with you and you may want to continue that tradition. But passing your company from one generation to the next may be the making or breaking of that venture. We can provide objective and independent advice to help you decide on the best way ahead.

Closing your Business

Sometimes it is not possible for a buyer to be found and the management is not able or does not wish to take control. The company’s products or services may have been overtaken by new technology or the industry may be mature with large, well-resourced competitors in a “commodity” industry where you can no longer compete on price. You may simply be tired. In such circumstances, it is important to plan for a smooth tax-efficient closure on your terms rather than being forced into a rushed exit.