Glenmede works with many clients and their advisors in navigating a variety of situations, including planning for liquidity events. This article discusses the intricacies of selling a business as well as a case study demonstrating an instance where Glenmede partnered with a mergers and acquisitions firm to meet one client’s needs before and after the sale of a business. Thriving businesses are built through hard work and perseverance. Thanks to that success, many owners have the opportunity to sell their enterprises for a significant profit. This process, however, introduces its own set of challenges. Maintaining and cultivating the proceeds of a sale requires a very different set of skills from those that enable owners to successfully grow a company.

For many owners, safeguarding and building upon assets as effectively as they built their companies means surrounding themselves with trusted advisors with wide-ranging skill sets.

• Engage a firm that can identify a buyer while working closely with the seller to understand the seller’s post-sale goals.
• It is just as important for sellers to collaborate with a relationship-driven wealth management advisor who can help define the seller’s objectives and create a long-term plan.
• A holistic wealth plan should incorporate the seller’s lifestyle objectives through his or her next venture to retirement and beyond, and simultaneously address the seller’s philanthropic goals and legacy objectives.
• A wealth management advisor should be equipped to assist in educating and orienting children and grandchildren with respect to prudent stewardship of newfound wealth.

A recent case study

In one instance, the co-owner of a manufacturing company, which he jointly owned with his siblings, decided to sell the business. The primary objective was to identify a buyer who would continue the mission of the enterprise with respect and understanding.

The transaction was complex, involving many family members as well as a variety of property holdings. The family hired a mergers and acquisitions advisor they were confident would remain involved after the sale to ensure a seamless transition and would prove instrumental in obtaining a business valuation, finding a suitable buyer and structuring the deal.

The sale of the business was only the beginning, however. One of the now former co-owners realized he needed an experienced and trusted partner to help organize and invest his assets and provide financial guidance as he embarked on the next phase of his life.

The proceeds of the sale included $25 million outright to the former co-owner, $15 million in trust for the benefit of his children — ranging from elementary school age to the late 20s — and an equity stake in the business, which ensured the co-owner would benefit if the company were again sold. Glenmede was retained due to its ability to demonstrate to the prospective client the value of a goals-based wealth management philosophy. Similar to the attributes sought in a mergers and acquisitions advisor, the business owner wanted an independent wealth advisor with a demonstrated ability to build long-term, in-depth relationships and provide the highest level of investment and wealth management expertise.

A goals-based wealth management philosophy is one that combines the collective skill sets of advisors who specialize in portfolio management; fiduciary advisory services; and financial, tax and estate planning in a collaborative, team-based environment and defines success by the client’s ability to achieve his or her articulated goals.

The Glenmede team worked with the client’s investment banker to comprehensively understand the nuances of the transaction. With that, the team embarked on the process of organizing the client’s many financial accounts, which required thorough review of all financial documents. For example, before any investment accounts could be established, Glenmede’s wealth advisors verified that the nomenclature used in estate planning documents matched the titling of new accounts. The wealth advisors reviewed estate planning documents to verify that fiduciaries and successor fiduciaries were named and current, and that retirement plan and life insurance beneficiary designation forms were complete and accurately reflected the client’s desires. Once the review was complete, Glenmede was able to build a holistic balance sheet accounting all the family wealth, liquid and nonliquid assets.

Once the team understood the client’s goals, they began the process of creating a long-term wealth plan. The plan included establishing a comfortable level of expenditure sufficient to preserve a reasonable income stream that allowed for wealth growth and incorporated tax-efficient philanthropic activities and wealth transfer to the next generation. Although the plan was constructed with enough flexibility to accommodate changes in family circumstances and priorities, it will be revisited periodically over the near and long terms as circumstances evolve.

For this client, Glenmede’s experience providing financial education to the next generation was important given the focus on wanting to prepare the wealth inheritors to not only steward the assets responsibly but also to uphold the family values. The Glenmede team recommended, as a first step, involving the children in family philanthropic discussions and age-appropriate activity. From these conversations, general financial knowledge could be gleaned until the child could be educated regarding sound financial practices and habits and, eventually, involved in discussions regarding the underlying investment strategy of their own portfolios. At that point, advanced concepts such as tax-efficient charitable giving could be introduced.

Conclusion

In many cases, it may be prudent for closely held business owners to seek advice well before a transaction takes place. This can provide the opportunity to consider strategies that are only available presale. Matters such as valuation discounts, gifting and maximizing the tax efficiency of presale transfers should be planned and prepared for long in advance. Whether sellers choose to work with their advisors before or after a sale, one element is crucial: finding a partner with a fundamentally long-term approach, a comprehensive and integrated perspective and experience building lasting relationships. The actual implementation of a wealth strategy can take years, and the sale of a business is just one part of a continuum.