“Selling the Family Business”
We finish this three-part series by emphasizing the importance of having all relevant and applicable advisors engaged leading up to and immediately after the sale of the family business. This process is somethings called “exit planning.” In his book How to Run Your Business So You Can Leave it in Style, John H. Brown defines exit planning as “a process that results in the creation and execution of a strategy allowing
In a previous post, we mentioned the importance of family members being in sync with their roles during the sales process. The same is true with knowing the advisors’ roles, and we lay some of them out below:
M&A Intermediary/Valuation Specialist. He or she performs the role of achieving and defining value. It doesn’t matter the reason you are selling; the M&A intermediary wants you to receive what you deserve for your family business, which as much as possible. Leave it to the other advisors to deal with potential income or estate tax implications. The M&A intermediary and valuation specialist are already armed with an expected price range, they’re ready to negotiate and refute any EBITDA adjustments the buyer proposes, and they know exactly how long the family wants to stay on board post-sale for transitioning. This advisor is crucial in making sure the deal moves along the predetermined transaction timeline.
Certified Public Accountant. Family members involved in the family business should meet regularly with their CPA during this process because he or she will be able to discuss tax implications and perform projections necessary to determine if any tax liabilities will be due. Additionally, the CPA can assist with any estate planning, which can include determining whether any shares of the business could be gifted or transferred to other family members in order to avoid estate tax in the future.
Estate Attorney. This advisor works closely with the CPA in drafting documents to establish necessary trusts and gifting or transfers of shares of stock or interests.
Corporate Transaction Attorney. We recommend that this attorney be experienced in M&A and not related to the family members. Hiring your brother-in-law, the divorce attorney who is trained to “kill” the other side in negotiations, is a recipe for disaster.
Financial Planner. A financial planner may need to be involved to properly invest your sale proceeds to achieve individual retirement goals and objectives.
We hope this information proves useful for all family business owners considering a sale. For inquiries relating to this blog series, please do not hesitate to contact Adam Freedenberg at firstname.lastname@example.org.