When one buyer makes an offer for a business, owners may need to weigh the offer against their financial needs and consider what they do not know about the market. A competitive process may provide additional information, but it can also bring added cost, time, and disruption.
The following scenario illustrates how a Buyer Decision Review can help organize the questions around an offer and a possible sales process.
The Situation
Jeannette and Jeff, both 60, had been Beacon Pointe clients for several years. Jeannette had spent decades building a successful specialty-manufacturing company. Jeff was a senior operations executive at a large company and planned to retire the following year.
A strategic buyer approached Jeannette with an offer of approximately $35 million. Her attorney and CPA were involved, but she had not hired an investment banker or spoken with other potential buyers.
They were considering several questions:
- What would Jeannette and Jeff actually net after taxes, transaction costs, and other obligations?
- Did the offer comfortably exceed their Personal Financial Exit Number?
- With only one buyer, how would they know whether the price and terms were competitive?
- Would a competitive sales process likely create enough additional value or better terms to justify its cost, time, and uncertainty?
Beacon Pointe Business Owner Planning Solutions
Jeannette and Jeff’s Beacon Pointe advisor, supported by specialists in tax, estate, and healthcare, conducted a Buyer Decision Review. The team confirmed their Personal Financial Exit Number and estimated their after-tax, spendable proceeds. The offer appeared comfortably above what they needed.
That shifted the question from “Is it enough for us?” to “What don’t we know with only one buyer?” The team identified what Jeannette’s attorney and CPA were handling, where transaction gaps might exist, and what additional market information could materially affect her decision.
They then calculated a Process Hurdle: what would a competitive sales process need to improve—in price or terms—to justify the additional cost and disruption? That gave Jeannette a clearer basis for deciding whether to test the market or continue with the current buyer.
Planning for Retirement and Family Needs
At the same time, the team coordinated pre- and post-sale tax planning and developed a retirement healthcare plan. With Jeff planning to retire the following year, they helped the couple evaluate private health insurance until Medicare eligibility and plan ahead for their Medicare transition.
The team also modeled the potential cost of moving Jeff’s mother closer and providing in-home or future assisted-living care, incorporating those costs into Jeannette and Jeff’s long-term plan. They prepared for the couple’s first family meeting and reviewed estate and insurance planning in light of the sale and their family goals.
The Outcomes in This Hypothetical Scenario
- The offer appeared comfortably above what they needed financially.
- They defined what a competitive sales process would need to improve to be worthwhile.
- They put a retirement healthcare plan in place for the years before Medicare.
- They incorporated potential support for Jeff’s mother into their long-term plan.
- They advanced pre- and post-sale tax, estate, and insurance planning.
- They began preparing for their first family meeting.
A Clearer Basis For the Decision
An offer from one buyer can raise questions that are difficult to answer from the offer alone. In this hypothetical scenario, comparing estimated after-tax spendable proceeds with the couple’s Personal Financial Exit Number helped frame the financial question. Defining a Process Hurdle helped them consider what a competitive process would need to improve—and whether the potential benefit could justify added cost and disruption.
If you could benefit from a conversation with our advisory team, we would be happy to provide a complimentary consultation.
Important Disclosure: This case study is provided for illustrative and educational purposes only. It is intended to demonstrate the types of planning strategies and advisory services that may be available through Beacon Pointe Advisors, LLC. The scenario may be based on anonymized, modified, or composite client circumstances and does not represent the experience of any specific individual or family. Any outcomes described, including tax, estate planning, or investment results, are hypothetical illustrations only and are not guarantees of future performance or results. Individual outcomes will vary based on personal circumstances, applicable laws, and market conditions. Beacon Pointe does not provide legal or tax advice.