Issues of Transitioning a Company

Here are the problems we see during company transitions and what we do to solve them.

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Over the last year, we’ve worked with many stockholders and business owners who’ve been trying to figure out how to transition their companies. Even after lots of time and expense with financial advisors and lawyers, they still can’t seem to come to a good decision.

Here are some common situations we see:

  • You’re looking to buy out the remaining stock of aging family members. Even if it’s not yet to the point where these relatives no longer want to work, you know you’ll need to make a buyout eventually.
  • You’ve been given the opportunity to buy into a new company, as its stockholders are retiring and they want you to buy them out.
  • You already own a company with different shareholders involved, but one of these shareholders is a problem. They may be putting in little effort, not working altogether, moving money around in unknown ways, or worse. In this case, you have a problem on your hands and are looking for a way to deal with it.
  • You’re looking to streamline a company that has way too many stockholders.
  • You own a business that makes up most of your estate’s worth, but only some of your children or relatives are in the business with you. You want to push stock to those who will be running the business, but you also want to be fair to those who won’t.
  • Instead of family, your business may have some great workers who you want to become owners and stockholders.

These are the issues our clients have on a regular basis. These clients try to come to a decision by pooling advisors, bankers, and attorneys, but it doesn’t quite work. A CPA can’t tell you what to do, due to financial liability. Lawyers can tell you about legal ramifications, but they can’t tell you what to do either.

Fortunately, our firm can give you a clear direction and show you what to do. Here’s a look at our process:

  • We sit down with stockholders to get a clear look at the state of their company.
  • We look at organizational charts, see what the management team looks like, and identify which family members are active or inactive.
  • We figure out what’s going on financially and find good valuations of the company—we want a good idea of the amount of money we’re dealing with.

We need to know the finances in depth because if you’re going to be buying out stockholders, we need an understanding of how you’re going to do it. We also assess the people in the company—we want to know how workers act, what their strengths are, where the talent is (or isn’t), and who has leadership capabilities.

What comes out of this? We build a knowledgeable proposal of what we believe you should do. This proposal demonstrates where the company is, where it needs to go, and what the steps are for reaching the final goal. What you’ll get is a strategy that achieves the best possible outcome with all things considered.

The goal is that, at the end of the day, retiring shareholders are taken care of, new management is taken care of, and buyouts can occur without bankrupting the company. If we’ve done a good job, the family won’t suffer a rift caused by financial decisions and the company will be in good hands. The best and brightest in your organization will have the chance to become owners and carry on the legacy of the company you’ve created.

If you’re going through any of these situations and need a direct, realistic plan of action, reach out to us. We look forward to hearing from you.

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