Building a successful business frequently takes many years of hard work and many more to sustain that success. Understandably, few owners relish the prospect that their company might collapse once they are no longer at the helm. Fortunately, one can avoid such fears with appropriate succession planning. For a traditional family business, the process may entail selecting which son or daughter will be most capable of taking on the leadership role after their parent’s exit from the business. Even in such cases, it will be necessary to make suitable plans well in advance to arrange the transfer of shares, minimise tax obligations and provide mentoring for the selected heir.
However, not every business owner has suitable and willing heirs or natural successors. Furthermore, while some sellers may wish to retire, others might prefer to retain a financial return or play an active role in their company’s future. In each case, the professionalsuccession planningservices of a merger and acquisitions (M&A) advisoroffers sellers a time-tested means to identify the most appropriate action and secure the best possible outcome.
In terms of possible actions, a business owner has the option to divest totally and may do so in one of two ways. One option might be to agree to a management buyout, giving current employees a managerial role and a financial stake in the company’s future growth. Given their first-hand knowledge and experience of the operation, its culture and goals, it’s an option that has merit. That said, a management buyout will also require careful succession planning. Typically, the total purchase price is seldom available at the time of closing, which is sure to raise potential tax and continuity issues that will need managing in advance.
The decision to sell all or part of a company is not always driven by a desire to liquidate assets and retire on the proceeds or limit one’s long-term responsibilities. Sometimes, these actions are a means to finance expansion plans, diversify or ensure future security. While an outright sale could mean a healthy boost on retirement, some owners may wish to retain a role in their company’s future. Given professional help with succession planning, a merger could provide the best of both worlds. Someone will need to undertake the marketing, identify qualified buyers, negotiate a sale price based on a realistic business valuation and secure any special terms stipulated by the seller. These are the day-to-day tasks of a mergers and acquisitions advisor.
Preparing a suitable plan is essential for several reasons. Firstly it obliges an owner to examine the business more closely, identifying areas that may require special attention before exposing it to the market. As part of an exit plan, succession planning also provides an opportunity to thoroughly explore the relative benefits and possible downsides of each available strategy with an M&A expert before making a final commitment.
Whether you are approaching a crossroads in your business and uncertain of which direction to take or would prefer a future with less responsibility, it’s time to seek expert help. Deal Leaders International is a sell-side M&A advisor with a worldwide reach and a unique sales approach that has gained them an enviable track record. Call a DLI advisor for crucial support with business valuations, exit strategies and succession planning.