A Family Business Case Study

July 24, 2015

 

This is an actual case where a RiskPoint Analysis was applied.

 

The business owner was 82 years old.  He started a communications business 35 years ago with a capital investment of $500 thousand. When a RiskPoint Zone founder started working with the owners, the business was worth $30 million. The owner had four children between 40 and 55 years of age, one of which works actively in the company. The son working in the company had been instrumental in running the company and growing it. The family had received offers which they chose not to accept because of valuation issues, and other management requirements.

 

The other three children were not involved in the business and were eager to get their share of money out of the business. If the business were to be sold it could cost the shareholders in excess of $7 million in capital gains and estate taxes. 

 

The RiskPoint Zone founder  was able to coordinate a set of valuable solutions resulting for the RiskPoint Analysis for the family accomplishing the following benefits:

  • Over a two-year period one strategy generated $10.5 million in cash to buy out the three children without encumbering the business stock or assets.

  • It provided a mechanism for the son who is active in the business, to acquire controlling interest while also initiating an exit strategy for himself.

  • It reduced capital gains and estate taxes to zero (saving nearly $7 million)

  • It provided substantial cash for the father while he still living.

  • Three years after this process began the company it grew in valuation to over $60 million.

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