Planning Your Liquidity Event: Four Groups to Consult with Prior to Selling Your Business
Getting the advice of an expert is always good form, especially if you’re about to chart into unfamiliar territory. If your business or asset sale occurs concurrent with your retirement, there are a few people, groups and professionals you’ll most definitely have on your Rolodex. Such connections will help to maximize returns, legally avoid taxes and make your liquidity event as smooth a transition as possible.
Investment Banker
The size and scale of your company will help determine whether or not you retain a business broker or an investment banker. Whatever you choose, it’s well advised not to sell your business alone. Fees aside, your business will likely have a higher chance of selling and a greater chance of selling for more if you hire a professional to assist.
It may or may not seem obvious to retain an M&A advisory firm to assist in the business sales process. Here are some key reasons to look for when finding the right M&A firm:
- Network Connections. M&A firms know private equity groups, wealthy individuals (including wealth management companies) who can assist in bringing more buyers to the table
- Valuations. M&A professionals know how to value, prepare and optimize your business prior to getting it sold. In short, it’s easier to sell your business for a higher amount.
- Hands-off. Not only do broker-dealers able to extract more value from your business at the time of sale, they also make the process more hands off by preparing all of the requisite marketing materials and executing on the hundreds (and sometimes thousands) of phone calls required to get the business sold.
Lawyer or Attorney
Attorneys are an absolute necessity when it comes to completing quality deals. All the legal agreements pursuant to deal completion, including everything from the NDA to the purchase and sale agreement, need the trained eye of knowledgeable counsel. Attorneys can assist and consult in how to structure accounts and options so as to best prepare for the coming cash inflow. That is, they’ll help with estate planning by creating trusts, uni-trusts (including charitable remainder uni-trusts) and other tax advantaged accounts. Knowing the ins and outs of how to legally protect your funds after liquidating your assets into cash is extremely important.
Tax Professional
Sometimes it’s helpful to have the CPA and attorney in the room together. Both can offer insight into the tax ramifications selling your company. However, someone in the tax trenches may offer greater insight in the form of deductions and processes that can take place prior to the sale which can decrease tax liabilities. In fact, I personally advise clients regularly to speak with tax professionals on a regular basis, especially if the company you own is highly profitable.
There are regular tweaks and changes in structure that can be made in order to ensure wasteful tax is eliminated. Your tax consultant should help you avoid buy-sell agreement triggers including estate tax issues, life insurance buyout options and the overall tax implications of buyout options.
CFP or Asset Manager
No liquidity event would be fully complete without bringing in an asset manager. Any true investment banker will know that financial planners and wealth management professionals in the area in which they work. Theirs is a complex web of connections. An asset manager will help to mitigate risk in your retirement portfolio while providing returns that coincide with the desired risk.
Selling one’s company can be the crowing achievement for many entrepreneurs who’ve spent their lives building successful businesses. Making smart moves prior to, during and after the liquidity event will help to save thousands in taxes and provide sustainable income for years to come.
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