Case Study: “Where has the Fire Gone?”

Facts on Exit Planning

Almost 50% have no plan to transfer ownership, management and control, and the percentage is even higher for companies that have been in business for less than 20 years
Nearly 60% of closely held companies have failed to gauge the potential tax exposure upon a transfer of ownership
25% are due to change hands within the next 5 years
About 90% of owners of closely held companies would like to transfer ownership, management and control of their companies to family or non-family key employees. Less than 50% manage to do so
Only 33% have defined criteria for hiring and promoting family members who want to take an active role in the business
Over 33% of closely held companies have no procedures in place for dealing with disputes between family member owners

^{1The statistics provided above have been derived from a variety of surveys of closely held business owners including: the PricewaterhouseCoopers 2007-2008 survey of nearly 1,500 closely held companies; the 2007 survey of 800 closely held businesses by the University of Connecticut School of Business Administration Survey; and the 2003 Arthur Andersen/Mass Mutual American Family Business Survey.}

Exit News

Situation and Objectives:

Bill is 53 years old, the President and sole shareholder of a testing laboratory with $7 million in sales, with a healthy 25% historic EBIT.
Although the business is successful by all financial measures, Bill is bored with the company and tired of running it.
He has been restless, looking for other opportunities in and out of the business.
He thinks the time has come to sell the company and move on to other interests.

Solution:

Bill was transformed back into a happy motivated owner...
Bill and his team worked through a collaborative process to develop a clear vision for the company and a process to manage the company strategically. All key people (not just Bill) are now engaged and invested in the future of the company.
A new incentive compensation program was created for managers to share the future value, reduce turnover and sharpen their focus on achieving the strategic goals of the company. This includes reducing Bill's day-to-day role.
Contingency plans were also put in place to reduce the risk that the value of the business would be diminished upon the death or disability of Bill.
Bill is once again enjoying the business, building long-term value and rethinking his retirement.