SunTrust Bankers Provide Exit Strategy and Tactical Advice For Clients Transitioning Ownership of Their Businesses

John Tabellione

Thursday, March 7th, 2019

As Baby Boomer business owners near retirement age in greater numbers, SunTrust advisors realize a greater need exists for their clients to learn the “who, what, when, where, why and how” of transitioning ownership, since the bank’s recent surveys have found that only one-third actually have such a plan. Most owners focus on the regular operations of their business and on the overall business strategy, with less immediacy in regard to their personal transition plans.

To address that need, SunTrust has taken proactive steps with their commercial accounts, but with a new sense of urgency than ten years ago. “Transitioning the business is already a part of an on-going dialog,” says David Camden, president of SunTrust’s Savannah Region, “and it’s our responsibility to our clients to initiate the dialog, and to keep it going until the time they are ready to execute on their plans.”

In addition to the bank’s client relationship managers taking this type of forward-thinking stance, SunTrust has initiated another forum to help clients advance the dialog: a series of panel discussions for retiring owners. The session panelists include not only key bank personnel, such as George Calfo, managing director, in SunTrust Robinson Humphrey’s Mergers and Acquisitions group, but also, attorneys and accountants. In the case of one such recent meeting, an already retired businessman who could speak from experience and relate well to the audience participated, as well. Hundreds of companies have attended these events across the country and SunTrust continues to ramp up more.

The owners have to also consider their personal wealth, how it may be intertwined with the business, and make decisions whether they want to continue in an advisory role, 

“So, transitioning is ultimately within the interests of our clients,” notes Calfo. He adds, “Most Baby Boomers are increasingly seeing a visible horizon to work life. The purpose of our company is to help our clients achieve financial confidence and this topic falls directly within that category, and we have a lot of experience in this area.” 

Calfo continues, “It’s easy to put off the future during the storm of things to get done today. So, we find that for many people the planning process comes into focus when there’s some catalyst, such as the loss of a significant customer; a health issue with the owner or among the owner’s family; or, an inbound request/indication of interest from a private equity firm, a competitor or another company. It can also be because a spouse said, ‘You told me you would retire at 70,’” says Calfo.

Calfo gives an example where three business partners received an unsolicited letter of interest in their company. “They danced a little bit with that party and then they realized they really weren’t prepared, and, so, they spent a year working with us and others to organize the business, get all of their books and records in order, and properly position their business to effect a transaction that would fit with their goals and objectives.”

By waiting and preparing the company they had a very successful outcome and received 60 per cent more proceeds than the original offer. SunTrust marketed the business and prepared it for sale by identifying and preparing buying outreach and brought potential buyers together at the same time to assure a fit for the management and to maximize the price for the seller.

In another instance, one with a significant partner and a minority one, SunTrust did the financial planning for them because they had most of their personal financial eggs in the business basket, and they were getting close to retirement. The wealth management team was advising them on diversifying their risks and wealth. 

“In those discussions, the owner revealed they had received an unbound offer for their business from their number one competitor and they thought it made real strategic sense to do, and they were contemplating the offer,” says Calfo. The business wasn’t quite prepared to do a transaction, however, so they hired SunTrust, which helped properly prepare the company and conducted the negotiations with that one interested party. “Through that work and cleaning up the books and records, we were able to generate an outcome for the business owner that resulted in an increase of 73% from what they were willing to accept to what they ultimately transacted for,” adds Calfo. 

From his perspective, Camden notes that most clients are very successful people, but that the vast majority of them do not have any experience in buying and selling businesses. In today’s environment of the explosion of private equity money and professional investors, SunTrust encourages owners to build their own team of experts, according to Camden.

He gives an example of one business that lent itself to a family transition. Camden says, however, “The family had struggled how to talk about it. There were multiple family members involved, several generations, and through initiating the dialog both with our wealth management team and our regular commercial banking team—the relationship managers—the family is now in that dialog and actively planning for a generational transition, which they had found very difficult to talk about. So, transitioning can take on many forms and the importance is to get advice from people who have been through it and have advised people through it so that you make smart decisions that end up with the best results.” The outcome in this case is why Camden calls their services of transition planning both an “emotional and financial process.”

Calfo cautions that the risk of going it alone without expert help leaves the business seller at a disadvantage vis-a-vis a potential acquirer who may have vast amounts of experience in this particular business arena. The owner may start the process and spend a lot of time, then get distracted, indicating they are not emotionally prepared for a sale, and then finally land up deciding not to go forward with the idea. So, he offers the following five-step road map for small business owners: 

  1. What is the end big picture that the seller is trying to achieve? “So, start with the end in mind,” advises Calfo.

  2. Devise a clear strategy on how you want to effect the transition. Is it with third parties? Is it in the family? To employees? What is the pathway that you’re envisioning that will hopefully get you to that end game?

  3. Timing is an important consideration. Keep the market and the economy in mind. “Market dynamics can play a role,” he states.

  4. Establish some sort of journey. What steps are required in preparing the company for transition? Do you have the right management in place? Do you need to augment certain positions? Do you need to put a CRM system in place? Do you need to consolidate all of the legal entities you’ve formed over the thirty years of running the business? Are all of your contracts up to date, and are you actually doing business as the contracts state, or have they migrated? This is mapping out the journey and the time frame.

  5. Build a team of knowledgeable people that have done it before. A lawyer, an accounting firm, a financial advisor (both personal and business) to really get the team on the field that’s going to help you maximize and ultimately get to the picture you painted in step #1.

“Our purpose is to light the way to financial well-being,” says Camden. “So our efforts in this area we are talking about are very consistent with that purpose. I love the image of a spiral staircase. You’re at the bottom of the spiral staircase and all you need is someone to light the way to take that first step. And once you take that first step you’re now on the journey, and so much of what we do from an advisory perspective is to illuminate that staircase and show them the first couple of steps and get them going. What we’re trying to do with this work is to encourage business owners to begin that thought process and get prepared.”

About John Tabellione

John Tabellione is an award-winning, professional business writer, complemented by over twenty-five years of strategic communication responsibilities as a Marketing, New Business Development and National Account Sales Executive in consumer goods and commercial industries. 

Experience with Fortune 500 companies, as well as with smaller firms and non-profits, encompassing a variety of products, including those of Georgia-Pacific, Kimberly-Clark and Stanley Works. 

John has a B.A. in English from Fairfield University and an MBA in Marketing from the University of Hartford. In addition, he has studied Russian at the Defense Language Institute at Syracuse University, and Italian language and culture at Kennesaw State University.