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A|E Consulting Services, Inc.

Ownership & Management Transition Planning

OwnershipPreserving and enhancing value is the primary focus of our transition planning services. Having a successful management transition plan is key to a successful ownership transition…even if there is a company sale to a third party. Companies always have more value if there is a developing “next generation” management team. A/E Consulting Services provides insight and guidance in developing your next generation management team.

Ownership transition planning involves developing viable options so that owners do not have to sell-out or merge in order to be paid for their investment in the company. The preference of most owners of professional service companies is to sell to their key employees rather than to a third party. As a general guideline, firms should begin planning for the transition of ownership 10 years before the anticipated event. A shorter schedule can be implemented, however transitioning options tend to be limited if there is less than a 5-year planning window.

Today, many ownership transition plans are developed primarily to attract and keep talent, and not primarily for retirement purposes. A successful transition occurs when the key employees have a clear picture of how they can afford to buy into the company, and retiring owners feel comfortable that they will truly receive a fair value for their investment.

The usual objectives of the ownership transition planning services A/E Consulting Services provides are:

  • Reward owners for their financial investment in the firm.
  • Provide opportunity for key employees to become owners of the business.
  • Help attract quality new people to the firm.
  • Provide for the financial health and continuation of the business as the existing owner or owners retire.
  • Create a market for the firm’s stock that guarantees retirement funding.

At A/E Consulting Services, we are experts at analyzing the advantages and disadvantages of the alternatives, presenting options and recommendations, reaching agreement on the best course of action, and working with you to implement the plan.  We demonstrate the possible pluses and shortcomings of using non-statutory deferred compensation plans, the Limited Liability Company [LLC] and Limited Liability Partnership [LLP] business formats, ESOP’s, and other ownership transition tools.

The process that A/E Consulting Services uses with business owners to develop their ownership transition plan includes:

  • Defining the objectives of the ownership transition plan.
  • Developing the criteria for company ownership.
  • Identifying potential new owners.
  • Developing a stock transfer schedule [repurchases/retirements and stock sales].
  • Deciding on an approach for the valuation of company stock.
  • Developing rewards distribution policies.
  • Testing assumptions to date with financial modeling [proving the plan will work].
  • Evaluating funding and financing of stock transfers.
  • Establishing shareholder return expectations.
  • Determining the Buy-Sell Agreement provisions and drafting the documents.
  • Identifying the steps and monitoring points for the implementation of the ownership transition plan.

The result of a good ownership and management transition plan that fits your company’s needs is a more successful and valuable company.

See our article on Ownership Transition Planning:

Ownership Transition Planning: The Value of the Process