Mergers and Acquisitions: The BWFA Advantage



By:  Brian MacMillan | Managing Director, Mergers and Acquisitions

It has been four years since Baltimore Washington Financial Advisors added Business Services to its core competencies of Investment Management, Financial Planning and Tax Services. The results have been outstanding as BWFA has worked with numerous business owners to help them understand their choices related to selling their business and how those choices impact their personal financial outlook.

Selling a business is not done in a vacuum. Developing a full financial plan that includes the sale of the business, but also other contingencies, is crucial. That’s why working with both BWFA’s Business Services team and its Financial Planning team helps business-owner clients come to good decisions. Together, our business advisors and financial advisors will create a comprehensive retirement and estate plan that looks at both the business owner’s current savings and investments, and the expected proceeds from the sale of the business.

BWFA will help the business owner define her goals related to the sale of the business and explain the impact of the options available to her. Some of the numerus questions a business owner will need to address are: When does she want to retire? What amount of money does the business owner need from the sale of the business in order to fund her desired lifestyle? Does she want to remain involved in the business? What tax implications will the owner face when selling her business? Which transfer of ownership method is best for her? How will she find a suitable buyer? How will the company’s employees be impacted by the sale? What should she do with the proceeds from the sale of the business?

Understanding the value of the business is crucial to the success of the owner’s financial plan as most of a business owner’s wealth is tied up in his business. BWFA’s Business Services team will guide the business owner through the valuation process, providing a picture of where the owner stands in relation to his goals. Depending on the time horizon for the sale, having an early valuation performed on the business may enable the owner to make changes to the business to increase its market value. Alternatively, a valuation may indicate that the owner can retire earlier than expected. The valuation will be used by our financial planning team as a crucial first look at whether the expected proceeds from the sale would enable the business owner to reach his financial goals.

Next, BWFA’s mergers and acquisitions professionals will help the owner determine the best methodology to use when selling her business. Identifying the business owner’s goals will allow her to determine which exit options may be suitable for her situation. Who will buy the business is always a major question. Many business owners want to transition the ownership of the business to heirs, but it is estimated that this is only an option for about one-third of businesses. Many children of small-business owners have seen how hard their parents have worked, and they have gone in other directions with their careers. Other options include selling to a current manager or co-owner, selling the stock to an employee stock ownership plan (ESOP), selling to another company, and selling to an investment group or private equity company. Of course, each option has pros and cons that need to be weighed by the owner and her advisors. Tax implications can vary dramatically between options. BWFA’s team of CPAs can work with the business owner to fully understand how each sale option will be treated regarding taxes. Some options may allow the business owner to sell the company and still continue to work and contribute to the company that she has built.

Once the most appropriate type of sale is determined, our Business Services team will take the business owner through the process of selling his business from start to finish. Through the entire process, BWFA’s guidance can help the owner through the many complicated decisions that arise when contemplating the sale of his business. Business owners work hard, building a business into a successful enterprise. The owner deserves the same level of effort from the team working to sell his business and manage his investments.

Regardless of where the business owner is in the life-cycle of her business, meeting with BWFA’s Business Services and Financial Planning teams to develop a path toward a successful sale can be insightful and rewarding. Remember that only 20% to 35% of all small businesses are actually sold. The earlier the business owner understands her options and creates a plan, the more likely a successful sale will take place.