The complexity of wealth and estate planning before the sale

DP+ Founder, Owner and CEO Mark Petrosky has run the full-service marketing and services agency for 24 years. He spent about a decade buying partners as he led the company through a sale process. It was time to sell, he decided, after an event necessitated a business valuation.

“And as we were starting to think about it, I just had a giant three years, which from a timeline point of view obviously makes a lot of sense. And with my age – I’m 59 – it started to happen to the point where I had to take my chips off the table, so to speak, and start funding my retirement and looking at the next generation.”

While he had a qualified plan as the source of some of his retirement funds, proceeds from the sale of the business accounted for a larger portion.

“I would say to my 30-year-old self now, you were crazy to rely so much on sales business assets, especially in the area of ​​marketing advertising,” Petrosky says. “There’s a lot of risk and a lot of volatility. I probably rolled the dice too long to take money, buy out partners and invest in the business. I probably would have been better off balancing it. But The bet paid off. So for future owners, I’d probably do a better job of balancing that act.”

The process leading to a sale took almost two years. He says it started by sitting down with financial advisers and trying to figure out what he needed to get out of the sale to generate the income he wanted to live on. At the same time, he was looking to his business valuation people to see if the company was ready to go to market.

“We started the process very conservatively in terms of probably almost 60% of what my team that was going to take me to market thought it was going to look like,” he says. “And we made all the tax connotations with that and so I was reassured by the financial planners what my number should be.”

Taxation, he says, is such an important part of estate planning. His main objective, however, was to secure his own retirement. Passing on generational wealth was secondary as the planning had already been done around his adult children and they both work.

Petrosky says he had done some basic estate planning before the decision to go to market, but as soon as he and his advisers started having a framework of what going on the market might look like and how much he money it looked like it was going to generate, a whole new level of sophistication had to be looked at.

“I completely transitioned to a whole new business and it became very important,” he says. “It’s so complex. I highly recommend anyone to think about it, you have to do it. And then we started looking at the generation jump and the gift trust and all the complex issues that could be resolved before the sale that you have to put in place with enough time before the sale for it to be accepted. So luckily I did that and we did all sorts of things to put in place more sophisticated estate planning eight months before the projected sale. And if I knew the numbers earlier, it probably would have been better if I did it two years before the projected sale.”

Petrosky, along with John Alfonsi of Cendrowski Corporate Advisors and Andy Busser of Pitcairn spoke at the Chicago Smart Business Dealmakers Conference about how a seller’s approach to pre-planning and execution – including taking factoring in the impact of taxes – can mean the difference between a deal’s success and failure. Press play to follow the entire roundtable.

Sharon D. Cole