Exit (M&A) Planning

John

Managing investment and opportunity for a LLC.

John had acquired the rights to a product that had been approved by the FDA and was considering two options - selling the asset or starting production.

What 3-5 questions did we ask John to better understand what was needed?

We sat down with John and asked the following questions
• What are the areas we can help you most as you take your product to market?
• If successful, have you reviewed your long term estate planning?
• What can we do to help maximize your sales price?
• Are there other key employees or folks you want to consider through this transaction?

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What solutions did we propose?

Once we explored the questions above, we can up with the following plan to maximize this one in a lifetime opportunity for John
• John and his children formed a new LLC to acquire the asset with a nominal capital contribution. Most of the LLC would be owned by John’s children
• John contributed the asset to the LLC in exchange for a preferred interest. We worked with the appraisers to provide the data needed for the appraisal.
• Key employees were granted equity interests or options
• Once the structure was in place, the LLC began production and took the product out to market. Thanks to John engaging in tax and estate planning prior to launch the outcome of his sale was vastly different than had he not engaged M&A professionals.

The result
• As a result of this structure, the vast majority of the gain was treated as capital gain resulting in a lower tax rate paid by John and his kids.
• Because the majority of the LLC was owned by Johns kids, much of the cash realized from the sale was excluded from John’s estate.
• Key employees received significant gain/compensation from the sale of the product that they helped to create.

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What does our ongoing relationship with John look like in the present day?

Today we continue to assist John with the new investments he has from the sale of his company. Our continuous conversations around tax and estate planning ensure John has all the right structures and plans in place as the law in consistently changing and new opportunities are coming to light.

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