The transfer of ownership of a private or family-owned business – whether from one generation to the next or by sale to maximize returns – is a daunting task. Taxes, family discord, the lack of qualified successors, and questions about management and ownership all come into play. Every decision has ramifications that determine the odds of the business surviving the initial and future transitions.
Saul Ewing’s team of business succession planning attorneys advise both individual owners and companies across numerous industries on the sale and transfer of their ownership interests for planned retirements as well as in the wake of unexpected incapacitation or death. We make an assessment of the business’ structure, finances and governance policies, consider the estate planning goals of the business owner, and develop a business succession plan that spells out the details of a transfer. The planning process includes six steps:
- Discovery, including interviews of the senior generation, a review of economic and personal objectives, the business’ health and future in the marketplace, and potential conflicts and challenges
- Goal identification, including analysis of objectives that fulfill the needs uncovered in discovery
- Transition plan creation, including assessment of ownership transfer options, identification of successors and options for the timing of the transfer
- Tax and estate planning, including review of income and estate tax strategies and determination of the source of funds for tax payment
- Transition plan implementation, including management of the process of ensuring that the plan is put into action and addressing challenges that arise
- Post-succession analysis and follow-up on an ongoing basis
Throughout the process, we work in close cooperation with other advisors involved with accounting, life insurance and financial planning, and take into account the emotional intricacies that tend to arise in these transfers.
In addition, the firm advises on and prepares shareholders’ agreements, counsels on plans to reorganize or sell businesses, including sales to employees, and assists with estate planning and dispute resolution.
For a selection of our business succession planning representations, click here.
- Negotiated the buy-out of a “rogue” shareholder and renegotiated the terms of a new operating and cross-purchase agreement for a manufacturing company in conjunction with estate planning for a majority shareholder.
- Represented the executor of decedent’s estate, which was the majority shareholder of a large glass manufacturing company, in protracted litigation and settlement negotiations surrounding a forced buy-out of the decedent’s interests under an abandoned shareholder agreement, including the eventual sale of the company and the decedent’s interests to a third party under the direction of a court-appointed receiver.
- Drafted and negotiated multiple shareholder, partnership, and operating agreements in conjunction with corporate counsel and the estate planning process. Instituted various estate planning “freezing” techniques, such as Sales to Grantor Trusts and GRATs to maximize estate tax savings for the transfer of interests in a closely held corporation to the next generation.
- Represented and advised one branch of a multi-generational energy corporation in Pennsylvania prior to, during, and following a sale of the corporation to Exxon Mobile for approximately $2 billion.
- Worked with the CEO of a female-owned-and-managed manufacturing corporation on various business and family succession planning issues, including the transfer of certain corporate interests at a discounted value for lack of marketability and lack of control discount.
- Advised both families in a two-family company through the creation of an ESOP, formation of family-limited partnerships, and the related planning for the founders and their spouses as well as the children and grandchildren of the two founders of the company. The handling of low basis stock coupled with the use of Grantor Retained Annuity Trusts resulted in diversification of the investments of the investment portfolios of family members while maintaining control over the management of the company.
- Advised a fourth-generation company dating to 1896 in passing control to the younger generations while maintaining the income generating capacity for the older generations and without payment of federal estate tax on the passage of the stock and control. In addition, the well-planned use of life insurance and the proper timing of stock transfers over many decades has enabled the family to keep the company intact, while growing the business and allowing for additional capital investment in the company. The engagement included working closely with accounting, life insurance and other family advisors to continually evolve the succession planning as the federal estate tax laws change.
- Advised on the successful transition of a family retail business with more than 30 locations from the second to third generation where insiders have substance abuse issues.
- Implemented the successful transition of a global manufacturing and distribution business to the fourth generation in an intensely tax-efficient plan that protects and preserves the business cash flow and cash reserves for capital expenditures, acquisitions and other business objectives.
- Advised members of the third and fourth generations of a construction contractor in planning and carrying out a program to transfer ownership and management and liability responsibility between the generations.
- Advised a distribution company in transferring ownership to a younger generation while preserving the income and retirement security of the older generation and plan for equitable treatment of family members not in the business.
- Advised a psychologist/business consultant in preparing a plan for the father-to-son transition in a food distribution business that protected the interests, both financial and emotional, of each.