Strategic Family Planning

YES! “Family Planning” Also Applies to Exit Strategies for Business Owners

By Dirk Armbrust Challenge: A business owner was considering selling and retiring while still wanting to secure a

By Dirk Armbrust

Challenge: A business owner was considering selling and retiring while still wanting to secure a future for his son who worked in the business

A manufacturing business owner was introduced to The Vant Group by his attorney.  The owner was approached by a private equity (PE) firm wanting to buy the business that he and his wife owned and whose son worked as a key operations manager.  The timing was good for the owner and his wife, but they were concerned about their son’s future.  Along with the normal stress associated with selling a business, they had multiple questions on their mind:

  • Would the PE firm lay off the son after the sale?
  • Would the PE firm provide an opportunity to stay and grow with the business?
  • Would the sellers be “penalized” when the PE firm adjusted the price for the son’s ongoing salary?
  • Was the PE firm’s offer strong enough to justify not listing the business in the open market?

We addressed the last two questions first.

We conducted a valuation assessment of the business.  Our analysis indicated that the PE firm’s offer was strong but not significantly above what the seller could expect from any other buyer.  We coupled this point of view with our expertise on current market conditions and salability of their particular business.  (If you haven’t heard, we are in a “seller’s market”.  There are many more buyers than sellers these days.)

Next, we prepped the owner with insight and “bullet points” to allow him to defend against the PE firm trying to reduce the sale price for the future salary of the son.  Because the son worked in an operating role and was adding value to the business, we prepped the seller for the conversation.

Then, we addressed some of the common myths associated with the M&A space.  Oftentimes, sellers worry that buyers (especially PE firms) will buy their business and then lay off a large portion of the workforce in a scorched-earth manner.  This is how M&A is often portrayed in movies, but this is the exception rather than the rule.  As you might imagine, this fear was front and center in this seller’s mind… especially when his son was in the employee population.  However, the simple truth is that today’s buyers are looking for solid, well-run businesses.  Buyers, especially institutional buyers like PE firms, would rather keep the acquired company’s infrastructure in place so that they can focus on growing the business.

Finally, we provided the seller key strategic insight on where they are today from a valuation standpoint, and what things they can do to secure a much higher sales price one to two years in the future.  Based upon this deep dialogue and engagement, the sellers decided to pass on the PE firm’s offer, and focus on growing the business together (mom, dad, and son), to reach their overall goals as a family.

This case is a representative example of how The Vant Group approaches clients.  There is often more to the story than just “how much can I get for my business?”  (Although that is hugely important.)  Things like family and succession planning issues matter.  In M&A transactions, we typically serve as “quarterback” for the “deal team”.  M&A advisors, attorneys, CPAs, wealth managers, and tax planners all have significant roles to play in this critical process.  We ensure all the players are working together to achieve the absolute best, holistic, outcome for our clients.

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