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One of the things I like most about my job is really getting to know the businesses we work with. Every business has its own story. Each has its own particular set of circumstances, challenges and aspirations, and no two are the same. But to really get to know a business properly you have to get to know its people.

I’m lucky in that in my role I deal with owner-managed and family businesses, where the owners are the people who are right in the middle of everything, living and breathing the business every day. It’s a tremendous privilege to be entrusted to advise and support a business by the people who are so emotionally invested in it.

Sometimes we will work on a particular case for a client which provides a perfect example of how we operate across the Progeny Group and showcases how our structure offers such a breadth of experience and expertise. This occurred recently, and I’d like to use it as a case study to demonstrate how the Progeny Group provides a rounded, unique, high quality service that brings exponential benefits to our clients.

Restructuring and the Benefits of a Joined-Up Approach

The case study starts with a family business, owned and managed by a husband and wife team, who are clients of Progeny Wealth. The business was a very successful SME and, as a family business, also employed the couple’s grown-up children. It had been successful enough to attract attention from private equity houses who expressed an interest in whether the owners would consider selling it. At this point, understanding that we at Progeny Law would be in the best position to help them with this particular situation, the clients’ dedicated adviser at Progeny Wealth introduced the owners to us.

As I take responsibility for the mergers and acquisitions undertaken by the Group’s clients I was delighted to meet with them. I enjoyed taking the time to get to know them personally and to understand their business thoroughly. We sat down with them and, having discussed with them their motivations and longer-term plans for the business, we established that they would be interested in a potential sale. We then looked at the business to work out how to put them in the best position to do this. The following questions were discussed in detail:

  • Although the business was very cash generative, did it have robust customer contracts to secure the healthy revenue stream?
  • How much value could be attributed to the intellectual property of the business? Was it appropriately protected?
  • Should the kids be brought into the shareholder group pre- or post-sale?
  • Was the management team strong enough to take the business forward without the owners? If not, what recruitment should they focus on?
  • Would they get the best value from a trade buyer or a private equity investor and how would that influence the way they present the business and its future potential? What was the growth story needed for a private equity investor?
  • Who were the likely trade buyers? Were they competitors, suppliers or customers?
  • Would the owners be prepared to remain with the business post-sale and for how long?

On examining the business, it also became clear that due to the way it had developed and its success in generating cash, the owners wouldn’t have been able to benefit from Entrepreneur’s Relief when they sold it. Entrepreneur’s Relief allows them to pay less Capital Gains Tax on a sale, paying tax at a rate of 10% on all gains on qualifying assets. Also, even if they didn’t sell they would not benefit from Business Relief, which reduces or removes any inheritance tax liability. Crazy as it sounds, the business had too much “cash” on its balance sheet! We helped them to address this by restructuring the business to ensure it would be eligible to qualify for these reliefs.  The restructuring involved the creation of a family investment company, into which we transferred the cash. To help with the restructuring, we were able to bring in the expertise of our colleagues at Progeny Private Law who advised on the structure of the family investment company and assisted with the Inheritance Tax planning.

We are now working through these issues with the owners. Once the business has been fully restructured so that they are in a position to take advantage of the tax relief opportunities and tax planning, we can start helping to market the business knowing that the owners will now be in the best possible position to benefit from the sale. Broadly we estimate we will save them c£500k of tax on a sale or c£2m on death.

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Progeny’s Unique Service

For me, this is a great illustration of how Progeny works. The Wealth part of our business helps an existing client of theirs by introducing them to the Corporate Law part of the business. We address the corporate law requirements of the client and identify their further personal legal needs, which in turn can be addressed by our Private Law experts.

Most corporate law practices can help a business prepare for a sale, but we were able to provide a service and the support for all of the other issues that exist around this, all under one roof. An undertaking like a business sale never exists in isolation; it will always be accompanied by any number of interconnected corporate and personal legal concerns, as well as the related personal financial issues. Never is this more relevant than in the case of owner-managed and family businesses, where personal lives are so closely bound up with the day-to-day running of the operation. In this example, we were able to help the business owners to identify and work through all of the elements and implications of their sale, spanning their professional and personal lives.

At the Progeny Group, we go above and beyond normal standards of delivery by providing the breadth of joined-up expertise to deliver a unique and bespoke service to our clients. If you’d like to find out more, or if you’d like any help with your personal, corporate legal or financial needs, please get in touch.

The content of this blog post is for information only and is not intended to be construed as legal advice and should not be treated as a substitute for specific advice. Progeny Law Limited accepts no responsibility for the content of any third party website to which this blog post refers.

Author Alistair Scott-Somers

Director, Corporate Law

Alistair joined Progeny Law in October 2016 and heads up the Corporate team.

Learn more about Alistair Scott-Somers

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