For family entrepreneurs willing to plan for the long term, there are a number of options available to safeguard the future of your family firm.
Entrepreneurs will inevitably put the majority of their effort into building up their business, with less impetus placed on planning for succession. In turn, a large proportion of those intending to pass ownership to the next generation have no formal strategy in place for how to achieve this.
Keeping it in the family
Succession to a family member is many entrepreneurs’ first choice, but aside from the practical challenges of ensuring the family member has the ability and desire to take control, there is also a question of receiving adequate value for the business. By seeking external funding and support, it is possible for a founder to pass on the business to the next generation whilst extracting value in a tax-efficient manner.
Fostering a team
Another option is to nurture a management team who have the ability to drive the business forward once it’s time to hand over the reins. When the time is right, allowing the opportunity for this team to complete a management buy-out gives you the opportunity to extract value from the business, as well as incentivise the management team to keep pushing the business forward.
There is, of course, a third option of a third-party sale (whether that be to a trade buyer or even involving private equity), which we have recently discussed in more detail here.
There are numerous succession options available and it can be difficult to decide on the best course of action. To consider the above (and other) options for your business, please get in touch with Magma’s Corporate Finance team below.
Our experienced and approachable team are on-hand to assist you, please get in touch below: