There is a strong trend toward business owners wanting to at least have a good
option to sell their business to their key employees. For some owners, it is the ultimate manner
in which to reward loyal employees, for others it is a hedge against an outside sale.
Whatever the reason, the challenges to structuring these buyouts are similar
in most circumstances. They include:
Lack of capital or ability to raise capital by the buying group.
Price and terms of the seller's note.
How to get fair market value without over-burdening the buying group (and risk getting the business back).
Transfer of key relationships and other "goodwill" to position the employee group for success.
At Blevins Financial we focus on two key areas. First and foremost we create a
Comprehensive Transition Plan. This provides a game plan for transitioning key relationships and
provides proper training for the new ownership group to help drive the long-term success of the sale.
Second, we design the most
Tax-Favored Transaction of the actual shares.
In doing so, we reduce the overall costs of the transaction by minimizing the impact of taxation.
By minimizing the impact of taxation, we often eliminate the entire process of price negotiations,
which is nearly always the reason for failed sales.
By doing this, the following benefits are accomplished:
Seller receives more NET (after-tax) income.
Buyers will spend less to fund the buyout.
Annual cash flow required to finance the purchase is greatly reduced, decreasing risk to both groups and increasing flexibility.
The transaction will be securitized against unforeseen events.
The design will often incorporate our Key Employee Retention Strategies to help keep the employees and provide a future down payment for the business (if the sale isn't occurring immediately).
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