Insights for Business Owners

Transcription

1 Insights for Business Owners Wednesday, December 2, Northern Trust Corporation

2 Succession Planning with a Capital S It s all about planning! Welcome & Introductions Charlie Mueller, Executive Vice President, Trust & Advisory Services, Northern Trust Paul C. Darley, Chairman, CEO and President, W.S. Darley & Co. Question and Answer Session 2

3 Key Session Objective The Key Objective for this session is for attendees to take away two or three practical ideas that can help them advance the succession planning for their own businesses. 3

4 Charlie Mueller Practice Executive, Northern Trust s Advisory Services Fiduciary Services Personal Trust Services Estate Administration and Settlement Guardianship Services Specialized Trust Services Delaware & Nevada Wealth Planning Financial Planning Wealth Transfer and Tax Planning Philanthropy Family Education and Governance Healthcare Benefits Consulting Special Assets Family Business Services Real Estate and Agricultural Services Oil, Gas and Minerals Management 4

5 Paul C. Darley W. S. Darley & Co. Mr. Darley is the President, CEO and Chairman of W.S. Darley & Co. a fourth generation family owned business. The Company builds fire trucks, manufactures fire pumps and sells fire fighting, emergency and special operations equipment. Mr. Darley has been instrumental in the succession planning for his family s business and has spoken to numerous groups of business owners on this topic. 5

6 W.S. Darley: Who We Are Financially Stable Privately Held Business Owned 100% by Darley Family 225 Employees Darley Divisions & Brands Darley Pump Fire Trucks Darley Equipment Darley Defense Odin Foam Ohler Pumps Polybilt 6

7 W.S. Darley: Who We Are

8 W.S. Darley: Who We Are Darley Family Tree Company Family Tree William S Founder 1908 Deceased William S Founder Deceased Patricia Patricia D. - Age D90 Age 90 Daughter of Founder Retired Daughter of Founder William J - Age 87 J Son Age of Founder 87 Former Son Chairman of Founder - Retired Former Chairman Retired President President Reginald C. - Age 82 C Son Age of Founder 82 SonDivision of Founder Mgr. Retired Mgr. Retired John C -Age C 54 Age 54 Pump MIS & Director Truck Pump Div & Truck Div James James Age -Age 5452 VP VP Marketing - Equipment Equipment Div Div Steve Krina J - Age 60 Cust. Age Service 58Mgr Cust. Service Retired Peter Peter F - Age F59 Age 59 EX Ex VP VP-Co- - Co-COO COO Apparatus Div Div Thomas S - Age 55 S Age 55 VP - Sales Equipment Equipment Div Div James James E - Age E Age 5254 Sales Sales Manager Manager Pump Div Div Paul Paul C - Age 39 Age 52 President & CEO & CEO Chairman Jeffrery S - Age 58 S Age 58 Ex VP VP- - Co-COO COO Truck && Pump Pump Div Deborah Deborah - Age 56 Age 56 Sales Equipment Equipment Div Div Mathew - Age 21 Mathew Maggie - Age Maggie Clare - Age Clare - 18 Mathew - Age 27 Web Mathew - 27 Willie - Age 25 Web Will Kevin -- Age 2522 Kevin - 22 Gabriel - Age - 17 Geneva Nicole - 14 Jasmaine Audrey - Age 27 - Def Audrey - 27 Maggie - Age 25 Def Maggie Sophie - Age Sophie - 21 Jason Jason - Age Sales Sales Ryan Ryan - Age Sales Sales Kyle - Age 27 - Eng Kyle Michael Age 25 Eng Michael - 25 Darley - Age 31 Darley

9 Successful Business Transition Requires 3 Distinct Planning Processes 1.Financial Planning for the owner 2.Strategic Planning for the business 3.Succession planning process Ownership succession Management succession Family governance 9

10 Ownership Succession How will ownership be transitioned to the next generation? Lifetime versus Testamentary transfers Planning considerations Specific family dynamics Transfer tax consideration Business Valuation Shareholder agreement Key Advisors Estate Planning Attorney, CPA, Business Valuation Professionals, Corporate Attorney, Trust Officer 10

11 Common Ownership Succession Planning Issues Issue Some family members involved in the business and others not Potential Solutions Get ownership to those in the business Transfer other non-business assets to those not in the business Use life insurance Create voting and non voting shares Execute a shareholder agreement 11

12 Common Ownership Succession Planning Issues Issue Sibling rivalry Potential Solutions Ownership succession tied to management succession Name successor and provide voting control Transfer shares to trust with independent trustee Other governance structures and family policies Be open and transparent 12

13 Management Succession Future leadership: Significant value attributed to management Future leadership Potential candidates Skills and capabilities Interest Transition strategies Mentoring Advisory Board Interim or permanent non-family executive? Key Advisors Advisory Board, Formal Board, Executive Compensation Advisor, Executive Recruiter 13

14 Management Succession Issues Issue Owner unwilling to cede control Successor not ready Indecision Several potential successors No vision for what the owner will do next? Potential Solutions Implement a leadership development plan Establish a board for input, accountability Create a transition plan for current owner 14

15 Management Succession Issues Issue No heir apparent Potential Solutions Recruit a non family member CEO Sell the business 15

16 Succession Planning Family Management Executive Team formed (1994) Successor? (1997) Cousin Consortium Non-family management team members 16

17 Bring the Next Gen Into the Business Mutual Respect Clear Authority and Responsibility Sense of Equality Training and Skills 17

18 Darley Family Participation Plan Must have the education required to do the job Required to work outside business in meaningful employment for 3-5 years No obligation for them to work for Darley nor Darley to hire them Paid market rate Held to a higher standard than other employees Report to a nonfamily supervisor (when possible) Company will be run by the best management family or not 18

19 Governance Succession Governance Succession requires thoughtful planning around who will transition into key decision making roles within the three main governance structures Business Board of Directors Ownership Trustee or Per Other Governing Document Family Family Council Family Assembly Governance Succession provides for coordinated decision-making by the various interest holders: Family Council, Board of Directors and Trustees Key Advisors: Family Education & Governance Advisor(s), Trust Advisor 19

20 Darley s Best Practices Family Business Ownership 20

21 Flashpoints Informal rules of family engagement are often a source of strain in the family system at times of change Lack of Liquidity Dividends Payout Ratio My Kid vs. Your Kid Fair vs. Equal Unwritten Rules Personal Use of Company Assets Poor Results Death of Senior Generation 21

22 Takeaways Service Expertise Integrity A well-developed Business Succession Plan will raise the value of your business, make your business more marketable and prepare the business for unforeseen or catastrophic events whether you keep or sell. There is no one-size fits all succession plan Successful planning takes longer than you may think, and is ongoing Having a team of advisors for each area maximizes the probability for success Communication is key in dealing with family dynamics Use proven best practices 22

23 Insights for Business Owners Q & A 2015 Northern Trust Corporation

24 Insights for Business Owners Thank you for joining us 2015 Northern Trust Corporation

25 Insights for Business Owners We Want to Hear From You Please visit: northerntrust.com/insightssurvey 2015 Northern Trust Corporation

26 Insights for Business Owners Replay Information Webcast registrants will receive a link via automatically northerntrust.com/business 2015 Northern Trust Corporation

27 Important Information IMPORTANT INFORMATION: The preceding information is intended for use with current or prospective clients of Northern Trust. Information is confidential and may not be duplicated in any form or disseminated without the prior consent of Northern Trust. The information is not intended to be and should not be treated as legal advice, investment advice, or tax advice. Readers, including professionals, should under no circumstances rely upon this information as a substitute for their own research or for obtaining specific legal or tax advice from their own counsel. This information is intended for illustrative purposes only and cannot be relied upon for tax purposes, does not constitute investment advice or a recommendation to buy or sell any security and is subject to change without notice. Northern Trust and its affiliates may have positions in, and may effect transactions in, the markets, contracts and related investments described herein, which positions and transactions may be in addition to, or different from, those taken in connection with the investments described herein. All material has been obtained from sources believed to be reliable, but the accuracy, completeness and interpretation cannot be guaranteed. Information contained herein is current as of the date appearing in this material only and is subject to change without notice Northern Trust Corporation