Pest Management Professional, September 2013

MERGERGUIDE2013 Sponsored by commercial cleaning real estate and other types of service businesses that have different criteria and dissimilar valuations The ideal consultant should be familiar with the pest management market whos buying and offering terms and potential buyers looking for certain size companies in specific geographic areas The consultant should have the respect and rapport with the principals of large medium and smaller pest management companies as well as with other nonconventional sources including venture capital firms investment banking affiliates and private equity groups A broker with extensive experience in pest management evaluations will have the proper contacts and in addition to bringing the right buyers to you will walk you through these vitally important decisions step by step FAMILY SUCCESSION Sibling rivalries are known to occur even in the best of families When you add to the formula a set of parents owning and operating a prospering pest management business the stakes can be multiplied tenfold Remember succession rather than promoting family harmony can drive a wedge between siblings far too often Succession can become a crutch or burden instead of a boost The most basic concerns voiced by senior adults contemplating the pros and cons of bequeathing the family business to their offspring involve phrases such as sharing equitably reinforcing family harmony showing impartiality keeping peace in the family and avoiding favoritism If the family is comprised of two or more siblings these factors should be a significant consideration The old country way of bestowing the lions share of inheritance and power to the oldest son doesnt cut it nowadays Another undeniable reality is not all heirs might share the same desire ambition or ability to manage a pest management company This slippery slope can be scaled by the Solomon like decision to treat family succession as two separate issues Should the individual be part of the company management or a shareholder Family shareholders can earn financial benefit from the earnings generated by the company and can use the earnings to follow whatever career paths they choose Consider the following before making your final decisions about succession planning Q What are the conditions and terms under which the company can employ family members Q Set rules for inactive family shareholders and family members engaged in the service and management sectors Will family members receive fairmarket salaries and benefits If its not in conformity with nonfamily members would this cause animosity Q Will nonworking family shareholders have a voice in decision making Can they veto management decisions Q Will the company be able to protect against a liquidity crisis and not allow cash on demand from inactive family members Q Should the company retain the right of first refusal via restrictive clauses if company shares are willed Q Because of rising divorce rates should the company delay financial rewards excluding salaries and performance bonuses for an agreed upon number of years for sons or daughters in law Q Should the company attempt to sway incoming younger family members to gain business experience outside their family business for a few years Q Consider family trusts as a financial tool particularly if your tax strategy is to skip a generation If you need the equity in your company to fund retirement plans golf travel investments hunting gifts charitable goals contingencies etc or if you dont have a tried and true heir or manager in whom you have complete confidence you might want to sell your company rather than pass it on PMP Cooper is a pest management industry mergers and acquisition expert who has consulted on more than 50 pest management acquisitions over the past several years You can reach Cooper a PMP Hall of Famer and former president of the National Pest Management Association NPMA at normcooper@ verizon net 914 698 8659 SELLING KEEPING THE COMPANY FACTOR THE COMPANY IN THE FAMILY DOWN PAYMENT Seller receives specific amount of Typically little or no down money often 70 as down payment payment at closing BALANCE OF COSTS Balance typically 30 paid Varies but often theres no throughout five years quarterly payment or semiannually with interest LIFE OPTIONS FOR OWNER Owner has numerous life options Unless owner can support retiring investing fishing golfing retirement and long term travel charitable giving sharing plans with previous savings in excess profit he she has few options POST TRANSITION IMPACT Owner can remain with company Sluggish economy could have as part time troubleshooter after an effect Booming economy transition Economic ups and downs should deliver positive effect and generational backup should but could have a negative have little or no impact impact on the labor market M8 September 2013 Pest Management Professional www mypmp net