Strategies for closely held companies
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Strategies for closely held companies Strategies for closely held companies Presentation Transcript

  • Moderator: Alexander B. Kasdan, Managing Director, DelMorgan & Co. Expert Panel: Neil Morganbesser, Co-Founder, President & CEO, DelMorgan & Co. Tim C. Bruinsma, Partner, Norton Rose Fulbright Jon Reich, Partner, De Castro, West, Chodorow, Mendler, Glickfeld & Nass, Inc. Robert Dalie, Executive Director – Investments, Oppenheimer & Co. Inc. EXIT STRATEGIES FOR CLOSELY HELD COMPANIES Copyright © 2014 Expert Webcast
  • 1 WEBCAST LOGISTICS: The audience is in listen-only mode Attendees are encouraged to type questions into the “chat” field Questions will be addressed at the end of the program Power Point link is available at MCLE / CPE processing link is available at For technical support, please contact GoToMeeting support: 800 263 6317
  • 2 Alexander B. Kasdan is a Managing Director at DelMorgan & Co. He has more than twenty years of investment banking, real estate, corporate law and corporate strategy experience. Mr. Kasdan has executed over 100 domestic and cross-border transactions totaling more than $10 billion in overall volume in a variety of industries. Prior to joining DelMorgan, Mr. Kasdan founded Convergence Capital Partners, LLC, a boutique investment banking advisory and real estate investment firm and was an investment banker at Barrington Associates, Peter J. Solomon Company, Credit Suisse First Boston and Merrill Lynch. Mr. Kasdan practiced law with O’Melveny & Myers LLP (formerly O’Sullivan Graev & Karabell LLP) and Paul, Hastings, Janofsky & Walker LLP (formerly Battle Fowler LLP), where he specialized in mergers and acquisitions, private equity and corporate finance transactions. In addition, Mr. Kasdan served as Corporate Counsel in charge of business development at Schlumberger Ltd., a global oilfield and information services company. Mr. Kasdan graduated magna cum laude from Middlebury College with a B.A. degree in Economics and Italian and was elected to Phi Beta Kappa during his junior year. In addition, he holds a J.D. degree from Columbia University Law School and has studied at the University of Florence in Italy. Mr. Kasdan is admitted to the Bar in the State of New York. Mr. Kasdan is a Senior Advisor to Governance and Transactions LLC, an advisory firm established in 2003 by Mr. James L. Gunderson, former Secretary and General Counsel of Schlumberger Limited, to assist boards, management and owners with corporate governance, compliance, structuring and strategic transactions. 100 Wilshire Blvd. Suite 750 Santa Monica, CA 90401 P: (310) 935-3826 M: (310) 980-1718
  • 3 Neil Morganbesser is co-Founder and President & CEO of DelMorgan & Co. where he provides senior leadership within the firm and helps oversee all client engagements. Mr. Morganbesser is also CEO of Globalist Capital LLC, DelMorgan’s broker-dealer affiliate. Mr. Morganbesser has over 20 years of experience providing financial and strategic advice to a full range of clients, including entrepreneurs, large corporations, governments, family businesses, private equity funds, and special committees of public companies. Mr. Morganbesser has been affiliated with some of the leading institutions in the world, and his experience ranges from representing the offshore owners in the sale of a small, private U.S. company for $10 million to representing the special committee of a large, public company in a $9 billion negotiated management buyout with a highly complex financial structure. Mr. Morganbesser has truly global experience with the most sophisticated transactions, across a broad range of industries and in a large number of jurisdictions, as the lead banker on a wide variety of transactional and other advisory assignments, including domestic and cross-border mergers, acquisitions, joint ventures, sales and divestitures, restructurings, special committee assignments, unsolicited acquisitions and hostile defense. With transactional experience in over 30 countries, Mr. Morganbesser has successfully advised on over 75 transactions. Until May 2008, Mr. Morganbesser was the head of West Coast and Asia Mergers & Acquisitions at Bear Stearns & Co., as a Senior Managing Director based in Los Angeles. Prior to joining Bear Stearns in May 2001, Mr. Morganbesser was an investment banker in the Mergers, Acquisitions and Restructuring Department at Morgan Stanley (in New York from 1993-1998 and in Los Angeles from 1998-2001). From 1990-1993, Mr. Morganbesser was a corporate and M&A attorney at the preeminent New York law firm of Wachtell, Lipton, Rosen & Katz. Mr. Morganbesser graduated with an A.B. magna cum laude in Applied Mathematics / Economics from Harvard University (Phi Beta Kappa) in 1986 and received his J.D. and M.B.A. degrees (Order of the Coif, with honors) from Stanford University in 1990. 100 Wilshire Blvd. Suite 750 Santa Monica, CA 90401 (310) 319-2000
  • 4 Tim C. Bruinsma is a partner and the head of the Corporate Law Department in the Los Angeles office of Norton Rose Fulbright, a global law firm which has 55 offices in 27 countries. Tim is a transactional attorney, providing legal representation in a wide variety of corporate and commercial transactions, particularly mergers and acquisitions, with an emphasis upon international finance and cross- border matters. His clients range from entrepreneurial and mid-market companies to multinational corporations. Tim has represented such corporations as a premier international toy company, the world's largest cereal company, a major Japanese- American automobile company, the leading wood products and forestry corporation, an international freight and transport company, the world's largest family entertainment corporation and a major Austrian bank. Tim was educated at Lehigh University, the University of California at Berkeley and Claremont McKenna College, where he graduated Cum Laude with a Bachelor's Degree in Political Science. He received his Juris Doctor Law Degree, Cum Laude, at Loyola University School of Law in Los Angeles. Tim serves on governing boards of non-profit corporations and organizations, including the Board of the Southern California Chapter of the U.S. Fund for UNICEF. 555 South Flower Street Forty-First Floor Los Angeles, CA 90071 (213) 892-9333 tim.bruinsma@
  • 5 Jon Reich, a partner at De Castro West Chodorow Mendler Glickfeld & Nass, Inc., is a trial attorney with more than twenty- five years’ experience litigating matters in the State and Federal Courts, the United States Tax Court, and in arbitration. His practice includes a broad range of business, trust, probate, partnership and insurance litigation matters for both large and small clients, as well as a variety of business transactions. Mr. Reich's clients include individuals, closely held business, partnerships and other entities, family trusts and corporate trust departments. As the primary trial attorney in more than a dozen trials, A graduate of both the UCLA School of Law and the UCLA Anderson School of Management, Mr. Reich emphasizes practical, business based solutions for staying out of, and getting out of, litigation and other disputes. 10960 Wilshire Boulevard Fourteenth Floor Los Angeles, CA 90024 (310) 478-2541
  • 6 Robert Dalie is an Executive Director – Investments, Oppenheimer & Co. Inc.. He joined Oppenheimer & Co. Inc. in 2000, and is responsible for providing wealth management advice to individuals, families and their fiduciaries across all asset classes. He also oversees the team’s capabilities, which include creating custom solutions that incorporate insurance, tax planning strategies, retirement cash flows, and estate planning strategies. Robert began his career working for an institutional trading team at Oppenheimer & Co. Inc. In this capacity, Robert’s role included completing trades, conducting quantitative research, and constructing Excel-based models. Robert is a member of the Los Angeles Financial Planning Association (FPA), and holds the Certified Financial Planner™ (CFP) designation from the Certified Financial Planner Board of Standards Inc. Robert graduated from Pepperdine University with BA in business administration and a BS in sports medicine. He holds the General Securities Representative License (Series 7), the Investment Company Products/ Variable Life Contracts (Series 6), the Uniform Securities Agent State Law Examination (Series 63) and the Uniform Investment Adviser Law Examination (Series 65). He resides in Los Angeles with his wife and four children. 110880 Wilshire Blvd, Fl. 24 Los Angeles CA 90034 310-446-7501
  • 7 ORGANIZER & HOST: Anna Spektor, Founder, Expert Presence / Expert Webcast Anna Spektor is a seasoned business development consultant and founder of Expert Presence, a leading management consultancy dedicated to helping professionals and senior executives effectively reach and engage target audiences, develop and solidify stakeholder relationships and increase brand awareness locally and nationwide. Anna is also the organizer and host of Expert Webcast and Expert Forum, leading thought leadership platforms delivering knowledge and insight on current issues and the latest developments in law, accounting and finance. 100 Wilshire Blvd. Suite 750 Santa Monica, CA 90401 (310) 995-6579
  • 8 MAJOR TOPICS •  Proper planning and assembling a team of advisors •  Specifics of family owned businesses •  Global economic and investment outlook •  Current deal environment and outlook for the future •  Goals of the founding owners •  Exit and /or succession planning strategies •  Management team considerations •  Value maximization •  Transaction structures •  Financial v. strategic v. “hybrid” investors •  Minority shareholder issues •  Estate and tax planning: pre- and post-transaction •  Post-transaction wealth and lifestyle planning •  Real estate •  Avoiding inter-family disputes and other landmines
  • 9 PRIVATE COMPANY EXIT STRATEGIES NORTON ROSE FULBRIGHT Tim C. Bruinsma, Esq. Partner, Los Angeles Thursday, April 24, 2014
  • 10 I.  FORMING THE PROFESSIONAL TEAM A.  It is never too early to develop an exit strategy. B.  It starts with a team of professionals. Typically, these would include: !  Corporate attorney !  Investment banker and valuation expert !  Tax advisor (income and estate) !  Wealth advisor !  Possible others: commercial real estate advisor (if there is a real property--owned or leased--involved) C.  Consider personal objectives and estate planning, market and economic factors. 2
  • 11 II.  CHARACTERISTICS OF THE COMPANY AND THE TRANSACTION A.  Numerous subjective facts and circumstances will shape the exit strategy: !  A partnership, a limited liability company or a corporation? !  A sale of all or only some ownership; control (?) !  Existing shareholder or buy-sell agreements B.  Special S corporation considerations. !  Impact on valuation !  Distributable cash C.  Related real estate transactions: are they an integral part of the transaction? !  Current lease or ownership of company facilities !  Proposed sale, leaseback in company sale 3
  • 12 II.  CHARACTERISTICS OF THE COMPANY AND THE TRANSACTION D.  Required consents–landlord, lenders; acceleration of loan commitments, change of control provisions. E.  Regulatory considerations: licensing, filings. F.  Special employee circumstances. !  Family members !  Legacy employees !  Unions !  WARN Act 4
  • 13 III.  FINANCIAL CONSIDERATIONS A.  Transaction structure: sale of assets or sale of equity? B.  Cash-out vs. deferred compensation, earn-outs, etc. C.  Income tax consequences. D.  Risks: representations, warranties, indemnities, holdbacks, escrows, etc. E.  Receiving stock as consideration, perhaps in a public corporation –restrictions, illiquidity and other risks. F.  Dealing with outstanding personal guaranties. G.  Employment or Consulting Agreement, Non-Compete 5
  • 14 IV.  OWNER’S PERSONAL CONSIDERATIONS A.  Continue to be active in the company? ! What role; a fiduciary position? ! Employment Agreement terms and conditions. B.  Continue to be active in the industry? – Non-compete agreements. C.  Protecting children and loyal employees in the business. D.  What to do with the sale proceeds--save, spend, invest? 6
  • 15 V.  POSSIBLE PROBLEMS TO HEAD OFF A.  Role of key management personnel going forward; employment agreements. B.  Outstanding stock options, bonuses. C.  Landlord issues; environmental problems. D.  Pending or threatened lawsuits. E.  Unfunded employee or pension obligations. F.  “Personal” commitments to children and long-time employees. G.  Historical problems that could surface: !  An incomplete or untidy buy-out of a former partner or shareholder !  A disgruntled employee or former spouse 7
  • 16 VI.  CONCLUSION Gather a good team of professional advisors and plan well ahead. 8
  • 17
  • 18 Disclaimer Norton Rose Fulbright LLP, Norton Rose Fulbright Australia, Norton Rose Fulbright Canada LLP, Norton Rose Fulbright South Africa (incorporated as Deneys Reitz Inc) and Fulbright & Jaworski LLP, each of which is a separate legal entity, are members (“the Norton Rose Fulbright members”) of Norton Rose Fulbright Verein, a Swiss Verein. Norton Rose Fulbright Verein helps coordinate the activities of the Norton Rose Fulbright members but does not itself provide legal services to clients. References to “Norton Rose Fulbright”, “the law firm”, and “legal practice” are to one or more of the Norton Rose Fulbright members or to one of their respective affiliates (together “Norton Rose Fulbright entity/entities”). No individual who is a member, partner, shareholder, director, employee or consultant of, in or to any Norton Rose Fulbright entity (whether or not such individual is described as a “partner”) accepts or assumes responsibility, or has any liability, to any person in respect of this communication. Any reference to a partner or director is to a member, employee or consultant with equivalent standing and qualifications of the relevant Norton Rose Fulbright entity. The purpose of this communication is to provide information as to developments in the law. It does not contain a full analysis of the law nor does it constitute an opinion of any Norton Rose Fulbright entity on the points of law discussed. You must take specific legal advice on any particular matter which concerns you. If you require any advice or further information, please speak to your usual contact at Norton Rose Fulbright. 10
  • 19 THE PAINFUL RESULT OF FAILING TO PLAN Failing to plan drastically increases the probability of: •  Lack of leadership and/or control in operating and maintaining the family business, either on an interim basis or long term. •  Family/Partner disagreements and infighting. •  Protracted delays in dealing with real time business issues/problems during court proceedings. •  Solutions/decisions are influenced/controlled by Courts and lawyers and not necessarily based on sound business judgment. All of which results in: •  Lack of direction/leadership for the ongoing business. •  An inability to attain maximum ongoing profitability. •  An inability to obtain the maximum value for the family business if it is to be sold. •  Substantially increased costs of administration.
  • 20 The Summa Group of Oppenheimer The Planning Process ! Key Planning Considerations: "  30 year accumulation phase converting to a 30 (or longer), inflation adjusted, distribution phase. Build the balance sheet & cash flow projections. "  Based on some basic assumptions we create a comprehensive road map. "  Goal based planning, as life changes so does your plan. ! Potential Risks & Opportunities "  Save 4,00,000 by age 65, out of funds at age 85. "  Solutions, increase return, save more or spend less. "  Run multiple scenarios and create optimized situation. "  Strategies that left a legacy at age 82, creates poverty with a life span of 90+. -$3,000,000.00 -$2,200,000.00 -$1,400,000.00 -$600,000.00 $200,000.00 $1,000,000.00 $1,800,000.00 $2,600,000.00 $3,400,000.00 $4,200,000.00 $5,000,000.00 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90