Over the past few columns, I have discussed issues related to selling the family business.
I’ve covered the importance of evaluating your life goals along with the dollars involved in a sale, the value of shaping up the management and financial statements, and the need to leverage expert advice. This final installment will convey a few techniques to optimizing the deal with the buyer.
It is key to understand that the buyer and the seller have divergent interests in the structure of the transaction, most of which revolve around stock and assets. The seller wants to sell stock, and the buyer wants to buy assets. There are a few reasons for this.
Imagine the business in question is a construction or drug company, and is sold. If years after the sale a bridge the company engineered and built collapsed, or a severe side effect was discovered with a drug or medical device the business provided, who is held liable? The answer is the owner of the stock. One of the main negotiation points in selling a business is will it be a sale of stock or assets.
The new owner, if they purchase the stock of a company, becomes liable for any claims against that company for all its previous work. As such, it is in the seller’s best interest to sell the shares of the business to shield it from any future responsibility.
There is another reason why the seller is interested in selling stock. If the value of the company had seen significant growth in the value of its stock over time, a sale of stock would be subject to a capital gains tax rate. With the current tax structure, the capital gains tax rate is lower than the income tax rate. This could translate into substantially greater net value from the sale.
On the flip side, the buyer would prefer not to purchase the stock of the company, but rather to acquire the assets. This enables the buyer not only to avoid any potential liabilities, but also to gain the depreciation and amortization benefits that come along with purchasing assets.
As an aside, assets that are not considered in direct line with the operations of the business should also be removed from the business. For example, having the land the business sits on residing in a separate LLC makes the business easier to buy if the buyer wanted to relocate.
In the classic book “Getting to Yes,” one of the main concepts is that many times there are components of the object in a negotiation that have little value to one party but a lot of value to the other. In negotiating over an orange, it might turn out that one party values only the pulp for the juice, while the other values only the peel for cooking.
Along these lines, there is a group of techniques that can be used to optimize the deal for one or both parties.
Terry Stanaland, a CPA and attorney in Greensboro and national lecturer on financial and tax topics, describes it this way: “Restructuring the deal from a simple cash transaction to correctly incorporating a noncompete clause, a consulting agreement, and/or an employment agreement can help achieve greater bottom line dollars for both parties involved in the sale.”
Sunday, May 22, 2011
Dynamic Wealth Management Headlines:Facing the future: Digital imaging could be next big thing in advice business
A unique combination of psychology and technology might be just the ticket for getting investors to start taking their retirement savings more seriously.
Speaking last Monday at the InvestmentNews’ annual Retirement Income Summit in Chicago, Hal Ersner-Hershfield, a postdoctoral fellow and visiting assistant professor at Northwestern University’s Kellogg School of Management, illustrated how individuals generally take their future more seriously when they can imagine themselves as an older person.
Speaking last Monday at the InvestmentNews’ annual Retirement Income Summit in Chicago, Hal Ersner-Hershfield, a postdoctoral fellow and visiting assistant professor at Northwestern University’s Kellogg School of Management, illustrated how individuals generally take their future more seriously when they can imagine themselves as an older person.
Dynamic Wealth Management Headlines:Crisis Report on RBS Collapse to Undergo Scrutiny
May 06, 2011 /The Treasury Select Committee (TSC) has called in two independent reviewers to look into the crisis report to be issued by the Financial Services Authority regarding the failure of Royal Bank of Scotland (RBS).
Similarly, a non-executive sub-group of the FSA Board chaired by Brian Pomeroy will conduct a separate review on the process and findings of the FSA’s report. The separate review is expected to “interface as appropriate with the independent reviewers.”
All About Dynamic Wealth Management Zurich
FOR IMMEDIATE RELEASE
(Free-Press-Release.com) April 15, 2011 --
As a Dynamic Wealth Management client, your portfolio will be structured using the disciplines of asset allocation, risk tolerance, and thorough understanding of your goals and objectives.
(Free-Press-Release.com) April 15, 2011 --
As a Dynamic Wealth Management client, your portfolio will be structured using the disciplines of asset allocation, risk tolerance, and thorough understanding of your goals and objectives.
We believe in the appropriate allocation of fixed income, equity, international stocks and bonds, hedge funds, and alternative investments.
Equities
Dynamic Wealth Management offers a variety of tools that can help determine which individual stocks are appropriate for your equity portfolio objectives. Our equity disciplines are style specific and can be crafted to meet customized client objectives and fulfill a defined asset allocation strategy.
At the Dynamic Wealth Management Zurich, Switzerland, we realize that no two clients are the same. Every client has different financial needs, goals, and plans. For this reason, the DWM offers a wide array of investment options to suit every client. We tailor your investment strategy to be as individual as you are.
Retirement Planning
Nudged by the government and buffeted by the demographic reality of retirees often living into their 90's, corporations have been rapidly offloading the responsibility for retirement income to their employees. Fortunately, many different financial vehicles now exist to help investors meet their own retirement needs. New products seem to emerge each month; some are marketing gimmicks while others may be valuable financial tools.
At DWM, we have adopted a process that relies heavily on client input and participation in all phases of the retirement planning process. Although it is a systematic approach, it is also tailored to each client's requirements. Through a series of planned steps, we work with each client to define major life goals, prioritize them and test them under various market scenarios. We then build to a recommendation based upon ideal vs. acceptable goals and risk tolerance. Many retirement programs stop here. Ours continues to full implementation of the plan and periodic monitoring of its progress. Finally, we stay mindful of new goals or priorities that may cause alterations of the original program.
We believe that retirement planning must be an ongoing process, not a glossy report that sits on a bookshelf. Only in this way can we provide the best likelihood of providing a retirement that is as free as possible from needless financial concerns.
At DWM, we have adopted a process that relies heavily on client input and participation in all phases of the retirement planning process. Although it is a systematic approach, it is also tailored to each client's requirements. Through a series of planned steps, we work with each client to define major life goals, prioritize them and test them under various market scenarios. We then build to a recommendation based upon ideal vs. acceptable goals and risk tolerance. Many retirement programs stop here. Ours continues to full implementation of the plan and periodic monitoring of its progress. Finally, we stay mindful of new goals or priorities that may cause alterations of the original program.
We believe that retirement planning must be an ongoing process, not a glossy report that sits on a bookshelf. Only in this way can we provide the best likelihood of providing a retirement that is as free as possible from needless financial concerns.
Dynamic Wealth Management - Reasearch Analysis
Research and Analysis
At the Dynamic Wealth Management, we realize that no two clients are the same. Every client has different financial needs, goals, and plans. For this reason, the DWM offers a wide array of investment options to suit every client. We tailor your investment strategy to be as individual as you are.Company Profile
Dynamic Wealth Management, Asset and Other Financial Advisory
Fraudsters have been stealing the identity of some of the UK’s best-known asset managers to stage an elaborate internet scam.
So far Aberdeen Asset Management, Schroders and Henderson Global Investors have discovered that bogus organisations claiming to be them have been soliciting for money.
Aberdeen has been moved to paste an announcement on its home page, warning
So far Aberdeen Asset Management, Schroders and Henderson Global Investors have discovered that bogus organisations claiming to be them have been soliciting for money.
Aberdeen has been moved to paste an announcement on its home page, warning
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