Mainebiz

V O L . X X V I I I N O. I V W E A LT H M A N A G E M E N T / R E T I R E M E N T R etirement is complicated enough. But trying to find the right time to retire when you have spent your working years run- ning your business can add another layer of complexity. Recently we've seen some interest- ing exit strategies. Last fall, in a "how to" column in Mainebiz, Drew Oestreicher, senior vice president and senior client advi- sor at Spinnaker Trust in Portland, and Colleen L. McCracken, a strate- gic business advisor at CLMC LLC, put forth a startling statistic. ey wrote that while 96% of busi- ness owners agree it's important to have an exit strategy, only 13% of those busi- ness owners actually have a written plan in place — "leaving," they wrote, "too much unknown for what comes next." Succession planning requires just that — planning. For many independent and/or family owned businesses in Maine, there are generally three options for succession, or retirement, Oestreicher and McCracken wrote. 1. Pass it onto the next generation: Even if family members want to take over, are they ready? Since ownership and leadership are different, you can get creative by giving ownership to the next generation and having an outsider run it. 2. Sell to an outsider: is can be an individual, a private equity firm, or a strategic buyer. 3. Adopt an Employee Stock Ownership Plan (ESOP): As an exit option that will yield full mar- ket value, many companies choose to share the benefits of ownership with their employees. As they wrote in the "how to" column, "an upfront valuation [of the company] is essential for providing a real potential value to an outside buyer and ensuring it meets the own- ers' financial needs and expectations." A buyer or investor is going to look at current market rates, an upward trajectory of revenues and EBITDA (earnings before interest, taxes, depre- ciation, and amortization) and a solid management team in place for a "seamless transition." F I L E P H O T O / J I M N E U G E R Brett Wickard, founder of Bull Moose, sold the company to employees through an ESOP. F E B R UA R Y 2 1 , 2 0 2 2 20 EXIT STRATEGY EXIT STRATEGY A roundup of ideas From buyouts to ESOPs, retirement poses challenges — and opportunities "e best time to sell is when the company is growing, the bottom line is growing and there is consistent growth and attractive prospects for the future," Oestreicher and McCracken wrote. With that in mind, here are a few recent examples of business sales. Weighing the options: Sale to outside buyer or to employees? Late last year, Day's Jewelers, a Portland- based retailer founded in 1914, said it transferred ownership of the family- owned business to its 120 employees under an employee stock ownership plan. At the time, Day's described the ESOP as a significant, built-in retire- ment benefit. Employees were not required to make an out-of-pocket contribution to the plan, yet would have a long-term vested interest. "When considering the future of the company, we weighed the options of selling to an outside buyer or selling to our employees. By converting the busi- ness to an ESOP, the future of the busi- ness would be kept in the hands of our employees, we could keep our current leadership, and the amazing Day's family culture we have built," said Kathy Corey, former co-owner of Day's, said when the ESOP was announced in November. Day's joined a number of other high-profile ESOPs in Maine, includ- ing Cianbro, Moody's Collision, Clark Insurance, ReVision Energy, Sebago Technics, Haley-Ward and others. e National Center for Employee Ownership estimates there are 6,600 employee stock ownership plans in the U.S., covering more than 14 mil- lion participants. Day's, founded by the Davidson brothers in Portland in 1914, at one time operated 21 jewelry stores across north- ern New England. Today, the retailer has eight stores in Maine and New Hampshire, as well as an e-commerce website. Kathy and Jeff Corey, natives of Fort Kent and Madawaska, acquired Day's from the founders in 1988. "Becoming an ESOP and placing our future in the hands of our tremen- dous employees, will ensure the contin- ued success of the company and culture we've built over the past several decades," said Jeff Corey, former co-owner and vice president of marketing. A retailer 'bullish' on ESOP model Another Maine retailer took a similar path with the ESOP model. Bull Moose, a retailer of music, books and pop culture items that's been around for three decades, became an employee B y P e t e r V a n A l l e n W i t h L a u r i e S c h r e i b e r , J e s s i c a H a l l F O C U S

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