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I spoke recently to Peter Churchill-Smith, managing director of Newport Private Wealth, one of Canada’s largest independent wealth managers.


April 19, 2013
By Mark Borkowski

I spoke recently to Peter Churchill-Smith, managing director of Newport Private Wealth, one of Canada’s largest independent wealth managers. His firm had conducted a survey of entrepreneurs who had sold a business to provide a perspective on what the experience is like. Based on the survey findings, ten practical suggestions were developed.

First of all, take a breath – a very long breath. The sale of the business often creates a void that will take time to replace. This transition period can take a year or more before you declare yourself ready for the next challenge.

 Recognize your new reality. You are not any wealthier than you were prior to the sale. However, your balance sheet has changed dramatically. If you are working for the new owner, your wealth is no longer lodged at your place of work. It is at the bank! And it is not getting the same 24/7 attention that it received before the sale.

The survey confirmed that a large proportion of business sellers park their funds in cash for three months to a year. For a large amount of money, you should have access to wholesale rates. Be like the majority of our surveyed sellers; ensure that you are dealing with someone with direct access to the money market who can ensure that you are receiving the rates you deserve.

Draw up a new balance sheet. There is no better time than now for you to take stock. Your affairs are probably more complex than you would like. You need funds to live and you need to understand which funds are best accessed from a tax perspective. You may be surprised to learn that the funds in the family trust belong to the beneficiaries, i.e., your spouse and kids. A detailed balance sheet will give you an accurate overview and help you identify issues that require immediate attention.

Get organized. Your money may be in several places such as a family trust, a holding company or family accounts. Many business sellers tell us that they are overwhelmed with the paperwork and it is very difficult to keep score. You might want to consider hiring a part-time bookkeeper.

Many business sellers have emphasized the importance of communicating their new reality with key family members. So much has changed and misunderstandings can easily arise. Recognize this possibility so as to avoid the unpleasant consequences. After all, the sale is a positive event.

You need to obtain an estimate of your tax liability. It may be due over several years and some may be deferred indefinitely. There are many strategies available including insurance and philanthropy. Focusing on these issues may be the best way to increase your net worth in the short term.

It is very likely that your estate plan, which includes your will and insurance, does not match your new circumstances. Does your will include provisions dealing with shares of a private company now sold? Are your current executors capable of handling the complexity of your new affairs? In my view, these are immediate concerns. I suggest you make the necessary changes so that your current plan works. More sophisticated changes can wait.

Charities will know you’ve sold. And they may know the sale price. You have moved up their list and they will now be soliciting you for a large commitment. Again, recognize your new reality and be prepared. Many entrepreneurs find it helpful to have a gatekeeper who will handle these requests.

Develop an approach for loans to family. Sooner than you think, you may be asked for a loan by a family member or friend. They may think that the loan is trivial to you. Sadly, they may feel the same way about repayment. Do you take security? Or document the loan? Will it set a precedent? These are sensitive issues.

A simple solution? Buy yourself time by telling them that your money is tied up with your advisors.


Mark Borkowski, is president of Mercantile Mergers & Acquisitions. Mercantile specializes in the sale of privately owned Canadian companies. He can be contacted at mark@mercantilema.com or www.mercantilemergersacquisitions.com .


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