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LIDO INSIGHTS | Liquidity Events for Founders | July 2021

Published 07-09-2021

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By: Dani Comart


Throughout the past year of extraordinary challenges, business owners across industries have been continuing to innovate and grow their companies. As the economy continues to reopen, many founders find themselves in a position to consider the next stage of their personal and professional lives. For some, this may include beginning the journey of an exit strategy and a path towards liquidity to support their lifestyle in retirement. Having the right team of trusted advisors in place early on can make this stressful and emotional time easier and more productive. The pre-transaction planning process requires intent, knowledge, focus, and communication. When combined with strategic estate, tax and financial planning, the result can be significant monetization of sweat equity.

Types of Exit Strategies

The path to liquidity can include Family Succession, Management Buyout, ESOP (Employee Stock Ownership Plan), IPO, Recapitalization, or 3rd Party Sale. Each type of exit comes with different considerations and a range of financial outcomes as well as future involvement for the business owner. In some cases, the next generation may not have the same interest or passion to carry on the mission. Sales to strategic buyers and financial buyers are more common than ever because of low-interest rates and tremendous cash raised by private equity firms that seek growth investments. This demand has resulted in favorable valuations for sellers and has forced buyers to become increasingly creative with the types of companies they purchase.

Pre-Transaction Planning

When selling a business, the focus shifts to closing the deal, which can often take months or even years. Focusing on personal wealth planning well ahead of time can result in significant savings on income, gift, and estate taxes. The process will require time and attention away from day-to-day business operations and should not disrupt customer relationships and employees.

Having worked with many business owners through the lifecycle of an exit, I have often found the most value can be added years ahead of the transaction. This can include basic tasks such as evolving your accounting practices to have “reviewed” and then “audited” financial statements which will give potential buyers more confidence. Most often, the valuation of a business the years prior to a sale will be far less than the eventual sale price. Taking advantage of lower valuations can allow the owner to transfer assets at a lower tax cost. Given the potential changes to income and estate tax law, these are important considerations to consult with your legal and tax counsel.

Post-Transaction: Wealth Management

Having significant liquidity is often an unfamiliar and new chapter for a business owner. A goals-based planning approach will lead to identifying the objectives, needs, risk tolerance of a portfolio. Replacing income and distributions a founder was accustomed to is a significant challenge in today’s lower interest rate environment with the stock market at all-time highs. Having portfolios that can go beyond stocks and bonds can create additional diversification and sources of cash flow for those who it is suitable for. These can include hedging strategies, real estate (debt and equity) and direct private investments.

Choosing an exit strategy or thinking about succession is likely not the first thing on your mind when starting a business. However, planning ahead and learning more about your options is an important part of building a business and securing your financial future.


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Lido Advisors, LLC is an SEC-registered investment adviser. Please note that SEC registration does not denote any particular competence or ability and no inference to the contrary should be made. For complete information on the services we provide and our fees, please review our Form ADV at adviserinfo.sec.gov, call (310) 278-8232, or mail us at 1875 Century Park East Suite 950, Los Angeles, CA 90067.

Past performance is not indicative of future performance. The information in this report is for informational purposes only and should not be relied upon as the basis of an investment or liquidation decision. Nothing in this report shall be construed to be a solicitation to buy or offer to sell any security, product or service to any non-U.S. investor, nor shall any such security, product or service be solicited, offered or sold in any jurisdiction where such activity would be contrary to the securities laws or other local laws and regulations or would
subject Lido to any registration requirement within such jurisdiction. All content herein has been obtained from sources deemed to be reliable, but is subject to unintentional errors, omissions and changes without notice, and is not warranted as to its accuracy or completeness. You should not rely on the information contained herein, and should rely solely on, and carefully read, the appropriate offering and related subscription materials relating to any specific investment product before making any investment decision.

Not all investments are suitable for all clients. It should not be assumed that any security listed or any recommendations made in the future will be profitable or without loss, including risk of loss of principal, or will equal any prior performance. All investments involve the risk of potential investment losses including the potential risk of loss of principal as well as the potential for investment gain. Further, the prior performance figures indicated herein represent portfolio performance for only a short time period and may not be indicative of the returns or volatility each portfolio will generate over a long time period. The performance of the portfolios should also be viewed in the context of the broad market and general economic conditions prevailing during the periods covered by the performance information. Any references to future returns/risk are not promises of the actual return the client portfolio may achieve. Before investing, investors should seek financial advice regarding the appropriateness of investing in any securities of investment strategies discussed. Not all investments are suitable for all investors.

The information herein is not legal, such as trust or estate planning, advice, or tax advice. Any such information is provided for illustrative purposes only and must not be relied upon without the benefit of the advice of your lawyer and/or tax professional. Lido specifically disclaims any liability from any reliance on such information. Lido is not a legal service provider or tax professional and does not offer legal or tax advice. Should you desire to obtain tax or legal services or advice, you must enter into your own, independent
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Lido specifically disclaims any and all liability arising from the information or illustrations presented in these materials and is not responsible for the consequences of any decisions or actions taken as a result.

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Lido Advisors, LLC is an investment advisor registered with the Securities & Exchange Commission. SEC registration does not denote competence, ability, or expertise.  As an SEC-registered advisor, we are required to publicly file certain information with the SEC as well as furnish or provide you with the opportunity to obtain information about our principals, employees, products, services, and fee schedules.  Please review our Form ADV, which provides this information, at adviserinfo.sec.gov, call us at (310) 278-8232, or mail us at 1875 Century Park East, Suite 950, Los Angeles, CA 90067 for a copy of our Form ADV.

The future is uncertain and cannot be predicted.  Past performance is not indicative of future performance. These materials are provided for informational and illustrative purposes only and should not be relied upon as the basis of an investment decision. You should not construe this as investment advice or an offer to buy or sell securities.  All content herein has been obtained from sources deemed to be reliable, but is subject to unintentional errors, omissions and changes without notice, and is not warranted as to its accuracy or completeness. You should not rely on the information contained herein, and should rely solely on, and carefully read, the appropriate offering and related subscription materials relating to any specific investment before making a decision to invest.

Not all investments are suitable for all clients. Investing carries a risk of loss, including the complete loss of principal. Different types of investments involve varying degrees of risk and there can be no assurance that any specific investment will be profitable or suitable for your financial situation or risk tolerance.  Any references to projected or future expected returns or risk are not guarantees, promises, or assurances that these outcomes will be achieved.  Before investing, you should seek financial advice regarding the appropriateness and suitability of the contemplated investment as not all investments are suitable for all investors.

We do not provide legal or tax advice.  Any investment has tax and legal consequences.  You should consult with a licensed professional prior to making any investment.