Barry Woodward was prepared to transition his forestry company to his sons, but soon realized they weren't interested in taking over as owners. With guidance from an advisor, he sold his business for a fair price to an outside buyer.
Barry Woodward was relaxing by the cottage at Green Lake after having tied up a long series of conversations with his sons Patrick and Jake about the future of the family forestry business. He was proud that both boys worked in the company, and envied by others in the industry whose kids didn't want to go into logging. They were off trying to become lawyers or technology entrepreneurs in big cities.
While Barry enjoyed the time working with his sons, he was never really sure if either or both of them were ready or willing to take over from him. Even as he got closer to retirement, he struggled with the thought of someone else making decisions that could affect the future of what he had built.
Every year when Barry sat down with Ian, his MNP accountant and adviser, he shied away from starting an exit strategy. Barry would say it was too early, the kids weren't ready, and he didn't want the competition or his suppliers to think he was selling. "This is a cutthroat industry. That information could be used against me," he'd say.
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Ian worried that Barry wasn't being proactive enough. Recently, another of his clients had been unable to find a buyer for his company. At almost 70 years old, he was facing increased competition and the business was unsustainable without him. In the end, the client had been forced to auction off his equipment for much lower returns than he had expected.
Barry had received one or two serious offers in the last few years alone and had briefly considered one. But he decided the new owners wouldn't run the business properly, the way he had always done. So he declined.
When Barry turned 60, his wife Nancy said they needed to think more about retirement and setting up a plan. He argued the business was doing well and he was enjoying the work. But Barry couldn't deny he was closer to the end of his career than the beginning. At the end of a particularly long week, he received a call from another potential buyer. This time, Barry agreed to meet. Three weeks later, the company sent him a detailed offer.
Barry sat down with his MNP adviser Ian to go over his options, noting the offer was "decent" and that he thought Nancy wanted him to take it. When Ian brought up the prospect of selling the company to Barry's sons, he said he still felt they still weren't ready to take over operations, but he'd consider it.
Ian set up a call with Patrick and Jake, who worked in different areas of the business located hundreds of miles apart. "If you want," Barry offered to his sons, "I will ease back on my role and start to hand this off to you. I'll teach you how to run the business and I'll help you be successful."
Over the course of the next few weeks, Patrick and Jake thought about it and spoke with their spouses, but ultimately, they confirmed Barry's instincts. Neither was ready to relocate their families to take over the central operations.
When Ian asked if there were any other potential buyers, Barry said he didn't want to advertise his business was for sale because he was concerned he could lose customers. Ian offered to make some discrete inquiries among MNP's network.
As it turned out, one of Ian's partners was aware of a business that was looking to expand and they wanted to make an offer as well. Barry now had two offers to consider and he could chose the one that made the most sense for him.
Before signing off on a sale, Barry went back to his sons to give them a chance to take over, saying again he'd help them out during the transition. Patrick and Jack still didn't want to move. They were happy with their lives as they were and encouraged Barry to take the offer.
"It's the best thing for you and Mom," said Patrick.
So, Barry accepted the best offer. The deal was still being worked out and there was a lot of paperwork left to complete, but it was looking promising. And the boys seemed to have no regrets. They were ready to work for the new owners.
And Barry was finally ready to let go of the reins and enjoy the next phase of his life, he realized, adding some kindling to the fire pit by Green Lake.
Key MNP insights:
- Even when family members, including children, are working in the business, they may not want to take over as owners. It’s important to maintain open communication so that everyone’s goals and aspirations are understood.
- Members of the millennial generation may not be as excited about the prospect of assuming the risks of owning a business.
- When seeking potential buyers for the business, discretion is often critical so that suppliers, customers and competitors are not aware that the business may be for sale.
- It’s important to take strategic action to maximize the value of the business so that you don’t end up selling only the hard assets like equipment.
For more information on how MNP can help you plan for succession, contact Shane King CPA, CA, National Leader, Succession Services, at succession@mnp.ca
People and events featured in the Green Lake series are composites based on real MNP clients.
This content was produced by MNP. The Globe and Mail was not involved in its creation.