How a family office can help business owners through a sale

Family offices are known for helping families grow wealth across generations. What’s lesser known is that family offices can also help a business owner as they look to exit their company.

The M&A sale process involves several advisers, on both seller and buyer sides, to deal with the transaction. The family office can make sure entities are in place and accounts are open on the business owner’s side that will be funded by the sale. Sometimes it is flowing into an LLC and distributing out to more than one owner. A family office can oversee the moves after the funds come into the LLC by working with all the shareholders to obtain wire instructions or assist with opening accounts for them. This allows the business owner to focus on the deal and not the paperwork minutia, answering questions about the actual transfer of proceeds, confirming wire instructions, etc. A true family office adviser will also serve as a sounding board to identify outcomes that ensure both the owner’s personal and family goals are achieved.

Family offices are also critical advisers when it comes to tax and financial planning ahead of the exit. There are several strategies that can be used to reduce a seller’s tax burden in what is often a once-in-a-lifetime liquidity event. Those strategies are most effective if they’re put in place before a sale.

Smart Business spoke with Aileen P. Werklund, CFP, member and chief client officer at CM Wealth Advisors, about the ways a family office can help business owners during the sale of their company.

What role can a family office play during the sale of a closely held business?

Family offices focus entirely on their client’s needs during the sale process. They work with the seller’s personal accountant to make the best tax and financial planning decisions, and make determinations such as how to handle any stock that might need to be issued. They’re also making sure everybody involved in the deal is on the same page and all voices are being heard. That’s important because without a holistic view of the full deal process, it’s difficult to get the best result.

Many sellers don’t realize they can employ a family office before the sale of their business. Instead, they tend to think it’s something they do after the sale to manage the wealth created by the transaction. However, a family office can be more effective if they’re invited to help with the planning prior. There have been instances of sellers doing nothing more than placing the tens of millions earned from a sale into their bank accounts, not knowing how best to deploy the proceeds. Many of them have not had wealth previously because their assets were tied up in growing their business, so they freeze. If they engage with a family office to help with tax and financial planning, they won’t miss out on any opportunities to preserve, protect and put that wealth to work.

How does a family office help the business owner’s family?

Change can be difficult, but worry about the unknown is even harder on individuals and families. An owner’s family often has concerns regarding what happens to them when the business is sold. They may no longer have a steady income streaming in from a job so they worry about cash flow. The family office can calm fears, purchase income-producing assets, and assure them of a seamless transition. The family office can provide cash flow projections that can work through those concerns, alleviating pressure from the business owner by helping the family understand the process and plan.

Many family offices also educate younger generations on a company or owner’s legacy. Some owners want younger generations to understand where their wealth came from. Some even produce videos for future generations, showing how the business was formed, how it grew and how it impacted its community. A family office can get the proper individuals in place to help the business owner express the legacy being preserved.

Because family offices work on a retainer rather than a percentage of the transaction or value of assets not yet received, their primary goal is to look out for the interests of business owners and their families. Working with a family office can help owners better manage the process, offer peace of mind, and maximize the wealth that follows a transaction for generations to come. ●

INSIGHTS Wealth Advisory is brought to you by CM Wealth Advisors

Aileen P. Werklund, CFP®

Chief Client Officer


Connect On Social Media
To learn more about how a family office can help as you sell your business,