Business Owner
Strategic Sale

How do I raise needed capital or sell my business to a financial or strategic buyer?

Situation Overview

David, a self-taught entrepreneur, built a successful construction engineering firm through hard work and determination. After ten years of rapid success, he recognized that in order to take his business to the next level, he would need additional capital. It was time to bring in a financial partner, such as a private equity firm, or sell to one of the public companies, which had contacted him frequently over the last five years.


David was referred to Capital Planning by his close friends, who had recently sold their business. Even though his primary objective was the business strategy, David realized he should look at the transaction from a personal wealth planning perspective as well. The initial steps of the process began with a Wealth Plan Assessment of the eight key components of his financial life:

  • Goals & Objectives
  • Cash Flow Planning
  • Compensation & Benefits
  • Investment Management
  • Tax Planning
  • Risk Management
  • Estate Planning
  • Wealth Administration

The gaps in his wealth plan were identified, priorities were established, and an implementation schedule was developed. Davidís core questions were:

  • How do I raise needed capital or sell my business to a financial or strategic buyer?
  • If I sell the business or raise capital, will it allow me to maintain the control that I now have as the majority shareholder?
  • Should I contact and negotiate with private equity firms and public companies directly or through a representative, such as an investment banker?
  • My net worth has grown substantially. How do I develop an estate plan to minimize excessive state and federal estate taxes?


His financial advisor led him through a strategic approach that systematically addressed each area of his financial plan and collaborated when necessary with accounting, legal and insurance professionals.

Capital Planning, in working with David, developed a wealth plan to address his most pressing issues.

Vision & Goals

Capital Planning assisted David in clarifying his vision and goals for the business, bringing more insight into prioritizing his time and resources.

Investment Bank Selection

After extensive discussions with Capital Planning, David decided to engage an investment bank to represent him. He agreed that an experienced merger and acquisition firm could bring significant value to the process and provide a competitive environment with a potential strategic or financial investor. Capital Planning arranged interviews with three top investment banks in the Pacific Northwest, and a selection was made. After engaging the investment bank, David was led through a systematic process to meet his business objectives.

Investment Bank Process

In the first three months, the investment bank helped David explore his growth plans and capital needs. Three options were identified, including debt financing, private equity, and a strategic sale to a public company. After extensive planning and discussions, David realized that a sale to ABC Public, a public company, was one of his best alternatives. ABC Public was already using Davidís firm as a subcontractor on many major contracts, and these projects represented a significant amount of his gross revenue. Davidís patented process better positioned ABC Public to secure work, and over the years, they had expressed an interest in acquiring his firm. If ABC Public made the purchase, the patented process would now be theirs, and this technology could not be used by their competitors, which created a significant strategic advantage. Because of this unique situation, Davidís investment bank was able to position his firm for a strategic sale at a valuation that was well beyond his expectations and original planning.

The Sale

After an 8 month process, ABC Public purchased Davidís company. He and his executive team signed a three year contract with a very favorable executive benefits package, including stock options, deferred compensation, and 401(k). In addition, a performance-based bonus plan was established. ABC Public had an experienced acquisition team and an extensive portfolio of wholly owned subsidiaries. Their history was to allow acquired firms to operate autonomously, yet with a high level of cross-selling opportunities and collaboration.

The Number

Since David had never contemplated selling the company outright, he had never explored the question of how much was enough to meet his long-term retirement objectives. Early in the planning process, Capital Planning assisted David in establishing an after-tax dollar amount needed to meet his goals. This analysis took into consideration his annual income needs, major expense planning, income taxes, charitable objectives, and estate considerations.

Investment Management

Capital Planning designed a custom portfolio based on Davidís return objectives, income needs, risk tolerance, and income tax considerations. Traditional and alternative investment strategies were selected to create a well-diversified portfolio. Ample reserves were maintained in bank accounts to meet his short-term cash requirements.

Real Life Solutions are for educational purposes and are not actual clients. These case studies are based on similar circumstances experienced by our clients. To learn more about our process, see Investment Management and Wealth Planning Services.


Proactive Wealth Management

With Davidís new role and the sale of the company, a significant amount of personal wealth planning was required.

Retirement Planning - David had no intention of retiring early, however his income needs where planned to help him estimate how much he would need to meet his retirement objective based on his conservative assumptions.

Income Tax Planning - David had always dreamed of having the excess cash flow needed to be more charitable, especially in supporting his alma mater. His financial advisor, working with a charitable service provider, established two unique strategies to implement prior to the sale of the company.

  • Charitable Remainder Trust - A charitable trust was established. Stock was transferred to the trust prior to a binding purchase and sale agreement, for which he received a current year income tax deduction. Upon sale of the company, no capital gain was incurred on the stock in the trust. In addition, the stock was now outside of Davidís taxable estate and would not be subject to estate taxes upon his death. He would be able to draw income from the trust during his lifetime, and then upon his death, the remainder in the trust would be paid to his alma mater, avoiding state and federal estate taxes.
  • Donor Advised Fund (DAF) - David makes regular annual gifts to various charities, and he wanted to be tax-smart about his approach. He transferred additional shares to his newly established DAF. He received a current year income tax deduction and avoided capital gains tax upon sale of the stock in the DAF. This account could now be used for annual gifts to his favorite charitable organizations, using both principal and interest from the account.

Estate Plan - Davidís estate documents had not been updated for years. A thoughtful generational plan was created that would address his estate transfer goals and the needs of his children and future grandchildren. An estate planning attorney was selected to update his documents.

Banking & Credit - In addition, Capital Planning, working with a private banking specialist, assisted David in establishing an investment credit line. With this line, David was able to extend his borrowing power for both personal needs and business opportunities.

Risk Management - Capital Planning requested in force illustrations from Davidís insurance professional on his life policies, as well as a current coverage report for property and casualty.

  • The life policies were underperforming, based on original projections, and premium adjustments needed to be made. In addition, the policies were owned outright in lieu of an Irrevocable Life Insurance Trust (ILIT). This would make the proceeds subject to estate taxes. An ILIT was created in collaboration with Davidís estate planning attorney.
  • The property and casualty coverage was in good order, except for the umbrella liability coverage, which was increased.

Personal Financial Website - A personal wealth management system was established that would keep all of Davidís plans on course. It provided consolidated account reporting, income and expense tracking, document storage, wealth management reports, electronic mail, mobile access, and wealth plan alerts. Wealth planning reports were made available to David, including reports on net worth, asset allocation, investment performance, and tax information.

Experienced Advisory Team - The Capital Planning team is led by a seasoned financial advisor and supported by a dedicated client service associate. As needed, other team members are available with expertise in financial advising, portfolio administration, and investment research. Regular reviews will be conducted to make adjustments and update the wealth plan.


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