Succession Planning

Owner managed businesses account for approximately 70% of all companies in the United Kingdom yet only about 25% survive the transition to the second generation and less than 15% to the third. Failure to plan for family succession is the primary cause for this scenario.

Consequently upon retirement of the existing family members the new generation of owners are totally unprepared or unsuited to assuming the responsibility of management and ownership.  As a result, a viable business often enters into decline and the value with it. Effective succession planning will minimise the potential threat to a business arising from the inevitable change in management and, or ownership.

How we achieve success for our clients
Our task is to identify and create legitimate options and to be directly involved in the implementation process. Our considerable experience of this work enables us to make a significant contribution to an orderly exit for the existing owners and the passing of a good business to the new owners at a realistic price for both.

Options for succession

In circumstances where there are no children or, as is becoming more evident, they are simply not interested in taking over the running of the business, the only option is often to ‘sell out’ to a trade buyer when approaching retirement.

However many businesses are so dependent on the owner manager that they are the business, which could not run without them.

Potentially, this can present an unattractive scenario for a trade buyer. Consequently the first objective of business owners must be to ensure that their company can flourish after they retire.

Strategic Advice & Planning

Proper management succession planning creates options. Even if ultimately the entrepreneur sells out, the presence of a good management team who are able to run the business without them will maximise the price. It also creates the option of a Management Buy Out.

This option is often too readily dismissed by owners on the basis that ‘they can’t afford it’. From experience, if there is a good team managing a growing business, raising the funding is not the key issue.

Family Ownership and management succession planning must be a carefully thought out process that should start long before retirement.

Taxation

Where the disposal of the business to third parties is concerned, we will ensure that the value is realised in a tax efficient way either immediately or over a period of time.

If appropriate, we will look closely at the options for transferring interests in the business to other family  members.  The tax planning will be centred on maximising tax relief and avoiding triggering unwanted tax liabilities.

There are specific tax issues surrounding succession planning in circumstance where the owner will have some continued association with the business for a period of time. This may include complex contractual arrangements and eligibility for ongoing benefits and future pension provision.

Our taxation advice also looks to the future, post sale, to incorporate compliance issues surrounding income provision and inheritance tax planning.

For further information please contact Bob Gore T: 0161 817 6100  E: bob.gore@mitchellcharlesworth.co.uk or Paul McGerty T: 0151 255 2300  E:paul.mcgerty@mitchellcharlesworth.co.uk