Business Owner Contemplating Retirement

Situation:

A client has owned a small manufacturing business for more than 20 years. He is in his early sixties and is planning to retire in the next few years. The business is a major part of his total investment portfolio. The client requested THOR’s assistance to develop a succession plan.

Solution:

Since the business is a major part of this client’s retirement plan, we explored the best way to capture the equity in his company. We explored three options with him: (1) direct sale to a third party; (2) structured sale to top employees with payments over several years; and (3) a sale to all employees through an Employee Stock Ownership Plan (ESOP). We explained the advantages and disadvantages of each approach and provided a thorough analysis of the impact taxes would have on each approach. Also, equally important to the client, was the on-going legacy of the business. He put his “blood and sweat” into the business and was emotionally attached to the people and what the business stood for. Some of the employees have been loyal to the owner for many years. We worked closely with the client to balance his three key objectives – maximizing his financial interests, leaving a legacy and rewarding long-term loyal employees. Our assistance was extremely helpful to our client and allowed him to make an informed decision about how to capture the equity in his company while taking into account his non-financial objectives. We have also assisted other clients with the option of transferring their business to their children upon retirement.