Ok, I admit it. I was recently drawn into watching one of the ubiquitous legal shows on TV the other night. (Hey, at least it was not CSI Topeka.) This particular episode revolved around a successful business with two partners. As the story unfolded, one of the partners experiences an untimely demise and the surviving partner is now a partner with the deceased partner’s wife. The balance of the show is filled with the requisite banter, scheming, and underhanded tricks, but ultimately the newly forged (however forced) partnership works out their differences and make for a good team. The misadventure ultimately ends well.
Pre-transaction planning. It is a rather uninspiring phrase that does not necessarily evoke a real visceral reaction to hit up the white board for some strategic planning. Who gets very excited about advanced planning when you have a business to run, goals to meet, and profit to earn? Well, I must admit, we do and we hope you will too as you read on. Let’s start with a little foundation building. Pre-transaction planning is the process of preparing your company, both operationally and financially, for the rigors of an eventual sale. In the M&A world, you can breakdown the sale process into the three broad categories of Planning, Execution, and Closing. It is our experience that most business owners and management teams focus intently on the latter two stages and do not always prioritize the investment of time and resources to plan for a successful transition well before the desired time to hit the market. It is this observed dynamic that has made Mr. Lincoln’s line “If I had eight hours to chop down a tree, I’d spend six sharpening my axe” apropos.
We recognize talk of life insurance does not typically gather a crowd around the water cooler at work, but as wealth advisors and planners, the proper use of this tool can be very impactful (in ways that are not always immediately appreciated too). In speaking with a long standing client the other day, we were reminded what a powerful tool life insurance can be.
