Business owners are well aware that launching, nurturing and growing a thriving business can be a time-intensive, painstaking, detailed endeavor. In addition to creating a business plan that will serve as a blueprint for success at the outset, owners should also consider how to proceed when it’s time to relinquish the leadership reins.
Backed by a strong history of relationship-building, an experienced team of professionals, and a vast portfolio of tailored, sophisticated financial solutions, Webster Private Bank stands ready to help business owners maneuver the process of planning and preparing a viable exit strategy, as well as effectively managing resulting wealth.
Be prepared
John M. Jezowski, Senior Vice President, Webster Private Bank, explains that the main objective in planning an exit strategy is to place the business owner in a “position of preparedness.” He points out that buyers may be sophisticated and experienced in executing financial transactions. “Being prepared as the seller insures the business owner has options and opportunities,” Jezowski reported.
Planning an exit strategy may seem to be a fairly complex and sophisticated process, but the process can be separated into three major scenarios, according to John H. Driscoll, Jr., J.D., LLM, CFP®, Webster Private Bank Region Market Executive for Hartford and New Haven.
“In the first scenario, the owner or management group can pass the company on to the next generation of related people, whether children, grandchildren or other family members,” Driscoll said. “The second option is to sell the business to an outside group, a synergistic firm in a similar industry. This might be a customer or a supplier. And third, management might opt to recapitalize the business through employee stock options or owner/management buyout.”
Given the Webster Private Bank team has many decades of experience; they are very equipped to earn the trust of their clients. The team emphasizes the importance of having a keen understanding of their clients’ objectives. “The business is their baby and selling it can be the most important event in their life,” Jezowski said. “We examine the relationship between the owner and the family and anyone else involved in the business. Does the owner want to keep the business in the family? If the owner is the founder, does he/she want to continue his/her legacy?” he said. “It’s important to have a non-financial conversation to understand their objectives before considering strategic options.”
For instance, the Webster Bank team met with a third generation business owner nearing retirement. The owner planned to transfer a significant portion of the business to the children. “At that first meeting the business owner emphasized that continuing a legacy was the most important purpose, not deriving significant wealth from the transaction,” Driscoll said.
“Our real value-add is in helping business owners plan and prepare for selling or recapitalizing a business, and to plan for and manage the wealth that is created in the process.”
Build relationships
When it’s time to discuss strategic options, Webster Private Bank can provide a comprehensive set of solutions to meet their clients’ needs. Driscoll explained that his team examines financial documents already in place, such as a current buy/sell agreement, wills and/or trusts. “We ask if they have gifted some shares to the next generation. We understand what the documents state and dig into trust planning to coordinate and estimate tax planning,” he said.
Many financial institutions offer advice to their business customers, but Webster Private Bank stands apart, thanks to its vast professional network. “We have excellent relationships with law and accounting firms, investment bankers, valuation advisors and others in many different disciplines,” said Driscoll.
In some cases, business owners may already have relationships in place and as their trusted advisor who provide the teamwork that enables others to also quarterback and orchestrate the process. “We are able to coordinate with other advisors and achieve a balance between what they already have and what might be missing,” said Driscoll. “The quality of our professional relationships is an important differentiator and enables us to always live up to the highest standards of our customers. The relationships we develop with business owners are based on earning their trust and providing sound, sophisticated financial advice.”
Manage wealth
Jezowski pointed out that Webster Private Bank’s team does much more than assist with planning an exit strategy for the business owner. “When the transaction results in a large amount of liquidity, we conduct a cash flow or valuation plan,” he said. “Our real value-add is in helping business owners plan and prepare for selling or recapitalizing a business, and to plan for and manage the wealth that is created in the process. We are dedicated to holistically look at global cash flow and liabilities in addition to managing assets.”
In some cases, business owners may have charitable intentions they want to fulfill as part of an exit strategy. This may entail establishing a private foundation, a donor advised fund or a large gift to a local community foundation or charity. “We work closely to maximize the tax benefit of this charitable planning,” Jezowski said.
“We advocate creating an exit strategy; review it thoroughly to maximize the ability to control your destiny. Without a plan, you lose the ability to make choices,” said Jezowski. Unexpected events, such as a serious illness or unexpected death, could complicate the picture. “It’s helpful to have an experienced team of advisors. Depending on the situation, we play a specific or general role early on in the planning phase.”
Driscoll reported that business owners should begin exploring options at least five years before a planned exit, although “it’s never too early to start.”
Whether an exit means selling the business, passing it on to a family member or colleague or recapitalizing, the team at Webster Private Bank has the expertise, professional network and financial solutions to make that transition seamless.
