Smart Succession: Ensure a Lasting Legacy

The decision to retire is more complicated than just a retirement party and a gold watch

Nearly every privately held, family-owned business will experience a change in ownership and leadership. As the owner of a closely held or family-owned company, you may think a lot about what’s next. How well you manage and prepare for a succession event may be the decisive factor in the overall financial success of your business and its stakeholders. BKD CPAs & Advisors has spent nearly 100 years working with closely held companies and is qualified to help business owners manage the sometimes-complicated succession planning process.

“Most recently, BKD launched an initiative called BKDnext® to assist closely held companies through the entire lifecycle of their business, including liquidity options and succession planning,” says Jeff Ronsse, managing partner for the Colorado practice. “In addition to traditional audit and tax services, BKD offers multiple services to clients, which are all critical to their succession planning.”

It’s been said that some 10,000 baby boomers turn 65 every day. For boomers who own companies, the decision to retire is more complicated than just a retirement party and a gold watch. In many cases, these business owners seek a liquidity event that will give them a comfortable retirement and ensure the health and growth of the business.

In a recent survey of closely held companies conducted by BKD, 40 percent of respondents said their businesses had never had a change of ownership or even a different CEO.

“Meanwhile, there is close to $1.9 trillion on U.S. non-financial companies’ balance sheets and more than $900 billion in private equity capital in the market today. Much of it moving to the middle market in search of quality companies,” says Anthony M. Giordano, president and managing director of BKD Corporate Finance LLC (BKDCF), a subsidiary of BKD CPAs & Advisors. “A liquidity event is often the most significant event that a private-held or family-owned business will experience while owning the business,” notes Giordano, stressing the firm takes a long-term approach to business.


BKD offers several services that help business owners address their succession needs. BKDCF, its investment banking arm specializing in sell-side, buy-side and capital-raising services, educates closely held businesses about their liquidity options and will manage the transaction process for clients.

For example, one of their clients was approached by several private equity groups and strategic buyers but had little experience in mergers and acquisitions. BKDCF consulted its client on multiple liquidity options, including how each would affect the company.

“We spent a year working closely with our client before we brought them to market, explaining the different types of buyers and investors, deal structures and benefits each partner could bring to their business. Finding our client the right partner and transaction has resulted in them tripling the value of their business in two years,” Giordano says.


“Another arm of our firm – BKD’s Transaction Services division – performs due diligence on earnings, cash flows and balance sheet movements, looking for any red flags,” says Brian Myeroff, a transaction services director. According to Myeroff, “There has been a real trend in the last couple of years where sellers are having sell-side quality of earnings reports prepared in advance of going to market with their businesses.”

Using a unique approach of diligence through data analytics and employing specialists with operational and IT experience, BKD extracts and analyzes data from business systems and thereby produces useful insights that can significantly affect the valuation of a company and simplify the diligence process.

“The sellers know their business well from an anecdotal perspective, but don’t necessarily have the metrics to allow a secondary type of analysis or prove the value proposition to third parties,” explains Myeroff. “BKD analytics can slice and dice the data in many different ways, including revenue or gross margin by product, customer, geography and market channel. Presenting information in this way can provide insight into a business that might have been overlooked by the seller or the buyer.”


“BKD also offers specialized tax advice on the structure of transactions, an important and sometimes overlooked aspect of deals,” according to Robb Conner, tax partner and tax practice leader with BKD’s Colorado practice. “The majority of the time, in a merger or acquisition transaction, a tax specialist will find very significant value for the client,” Conner says.

It’s all part of BKD’s philosophy of taking a long-term view.

“We spend time with clients early in the process to make sure we’re addressing their ultimate objectives,” says Giordano. “We may work with a client for several years before we move toward a liquidity event, making sure their business is prepared to go to market and our clients understand all the liquidity options particular to their business.”

It’s also important to remember succession planning doesn’t always revolve around planning for an sale to a third party. In fact, in many cases it doesn’t. Through the succession planning process, it’s common for the stakeholders to decide they want to remain independent.

“In that case, succession planning is arguably more critical,” says Conner. “Developing a plan to transfer ownership and remain independent requires a thorough evaluation of our clients’ facts, goals and objectives. Remaining independent highlights the need to develop, retain or attract the necessary leadership to perpetuate the business.”

“Our advisors take a long-term view and a broad perspective, showing family-owned businesses an array of paths in terms of succession,” Ronsse says. BKD’s experience with closely held businesses, and its knowledge of the nuances required in such relationships is one of BKD’s strongest competitive advantages. “We believe in getting a client talking about these issues and their options sooner rather than later,” he says. “Then they can take some proactive steps to get their house in order to improve and bolster the value of the business.”

The result is the large number of quality lower- and middle-market companies that BKD prepares for the next stage in the cycle, whether they remain independent or are brought to market in a third-party sale.

This content was adapted from an article originally contributed by BKD to Middle Market Growth magazine for its winter 2017 issue.

Categories: Management & Leadership, Sponsored Content