Transitioning at the top

Strategic advice

Know you got full value for your business.

When the owners of a Georgia food processing company received an unsolicited bid for millions of dollars, they thought they‘d struck it big.


They’d been busy building the business for 25 years and hadn't realized they’d created a company worth buying. When a buyer appeared, they were willing to sell right away.


However, an accounting professor, the wife of one of the owners, interceded. She told her husband that the business wasn’t ready to sell and the offer would likely be reduced after the buyer conducted thorough due diligence. She argued that the company would be worth more with a little extra time and effort.


So rather than selling immediately, the owners hired professional advisors to help them prepare for an eventual sale, including advisors from Truist Securities. Together, they created transition plans for the business and its owners.


The plans included installing an enterprise resource planning system, separating business expenses from personal expenses, and devising wealth management strategies for the owners’ sale proceeds. Two years later, the company sold for 70% more than the original offer.


“The owners realized they had created a great business, and through careful planning and hard work, they could increase its value even more” said George Calfo, a mergers and acquisition investment banker at Truist Securities., “It shows that a little bit of patience and some preparation can yield a much better outcome.”


Such patience can be scarce among today’s business owners. Plentiful capital drives acquisitive buyers to make unsolicited calls to companies. Owners at or near retirement age can be easily tempted to consider any offer.


The best way to prevent buyer’s and seller’s remorse is transition planning. That means taking the time to plan out your goals, select your advisors, and put the right structures in place to maximize the value of your business and your personal wealth.


Many owners are cashing out now, but a lack of transition planning has left them wondering whether they could have done better in the future. When a business transition fails, it’s usually because it wasn’t properly planned to maximize value and personal satisfaction for the owners.


Preparing for a transition

Truist helps owners prepare themselves and their businesses by following a business transition roadmap that covers three phases.

  • Phase 1: Laying the foundation for transition
  • Phase 2: Leaving the business
  • Phase 3: Managing post-transition

Calfo offers these suggestions for a successful transition.

  1. Start with the end in mind. Once an offer is on the table, owners often focus on the transaction instead of the broader impact on their business and personal plans. Envisioning life after the business allows an owner to set goals for themselves and their business. The owner can use these goals to determine if an offer is right for them and their company. A long-term strategy starts by answering open-ended questions like:
    • Who do I want to run the business?
    • What is my time frame for transition?
    • If I’m going to the office every day, what will I be doing?
    • How much do I need to support my family post-transition? Where is the money going to come from?
  2. Think about mergers and acquisitions (M&A) strategically. Many middle-market companies have little M&A experience. According to Preparing for Major Business Transition from The National Center for the Middle Market, 63% of owners had no M&A experience within the past 5 years, and 67% had no experience with ownership changes either. Half of those going through a business transition had some negative outcome, which is hardly a surprise given their inexperience with M&A and business sales.Disclosure 1

    Entrepreneurs are often surprised by how hard it is to sell a business. Getting up to speed on the sales process, responding to due diligence, and keeping the company performing at its best to keep the sales price high is no easy task, even for the most accomplished leader.

  3. Plan the steps required. Planning for a future transition means taking on a number of pressing issues. Ninety-eight percent of those who start planning 3-4 years in advance are satisfied with their transition results as opposed to 33% who start planning less than a year in advance.Disclosure 1

    Transition preparation often leads to a higher business valuation and more funds available where owners need them most, after the sale. Whether you sell the business or keep it in the family, boosting performance and having your personal affairs in order leads to a winning result.

  4. Assemble an experienced deal team. Align yourself with experienced accounting, legal, and financial advisors who can give you the right advice for the best possible outcome.

    “Experienced advisors are essential when an owner encounters a buyer like a private equity firm,” Calfo said. “When inexperienced business owners deal with experienced buyers, a tremendous amount of value transfers from the seller to the buyer.”

  5. Plan for life post-transaction. Whether it’s spending more time with family, getting involved in the community, pursuing a lifelong interest, or even starting another business, having something to look forward to after leaving the business eases the transition for the owner. Many owners don’t know what they want to do after the transition.

    Though buyers might be eager, and retirement may be beckoning, an owner without a transition plan will be disappointed by even the most tempting offer. Proper planning and experienced advisors can help an owner create a post-transition game plan and have the cash on hand to support it. That’s what makes a successful transition.

Get your business and personal finances ready for whatever’s next.

Learn how Truist can see you through transition. Contact your Truist relationship manager or find a wealth advisor to start the planning conversation.