Family Business Up For Sale? Know Your Next Steps BEFORE the Deal Closes
Submitted by American Endowment Foundation on April 24th, 2017By Eric Kinaitis
A panel discussion captured insights from families involved in a sale of the family business. The discussion provided some interesting takeaways as to why these families chose to sell, the issues/concerns they came across during the process, and what life was like post-sale.
Why did they sell?
Potential liabilities and increasing regulation were some primary drivers. Conflicts in business vision, family dynamics, and lack of interest from the next generation to take over the business were additional concerns.
The importance of good advice . . . early in the process
Recognize that a variety of advisors are needed for their specific expertise (accounting, wealth management, business, legal, etc.) They need to fit well with the different constituents, other advisors and the different family members involved. They need a deep understanding of the family goals. Recognize that these relationships take time to build and need to start early in the sales process.
Life after the sale
Business and personal goals and viewpoints can be highly inter-woven in a family business. Without the business, family members can have a loss of identity. It is important to recognize this prior to the sale and determine concrete next steps in the process.
Some families turn their attentions to creating a family office. Others use the opportunity to create a new business. Some engage in family philanthropy that helps organize the family toward strategic charitable efforts. Some family members may even want to use this as an opportunity to pursue their own individual paths away from the family’s common interests.
The concept of charitable planning can play an important part in the selling process. By understanding and organizing a business owners’ thoughts about what kind of legacy they may want to build post-sale, a trusted advisor(regardless of their exact role) can have the owner provide concrete thoughts on transitioning from “success to significance.”
A donor advised fund (DAF) can be an ideal tool in this process. Not only can it be a source of tax savings, but it allows the business owner to engage in their charitable giving with a great degree of flexibility. A DAF at American Endowment Foundation (AEF) even allows business owners to fund their giving through such illiquid assets such as S-corp or C-corp shares from their business.
Learn more about how sellers of family businesses have used AEF DAFs to build a new legacy based upon their past business success. Call us at 1-888-660-4508 or contact us to learn more.