In order to address significant estate tax liabilities and competing family priorities, one family-owned business sought assistance from Interchange Capital Partners. While some second-generation (G2) members wanted to exit the business, others aimed to continue its growth, creating a need for liquidity without disrupting operations or future plans.
The family faced several key issues:
Significant estate tax challenges following the passing of a first-generation (G1) family member, with ongoing payments on a substantial tax bill.
Additional liabilities looming if any G2 members passed away, exacerbating financial pressures.
Divergent goals among G2 members, with some seeking a buyout and others committed to growing the business.
Interchange developed a tailored plan focusing on liquidity generation through the strategic sale of lazy assets—valuable holdings that did not actively contribute to cash flow or business profitability.
Key steps included:
Asset Evaluation
Identified non-contributory assets with significant value that were not actively generating cash flow.
Assessed which assets could be sold without negatively impacting the business’s operations or growth trajectory.
Strategic Liquidity Planning
Structured transactions to generate immediate cash for partial buyouts of G2 members seeking to exit.
Designed terms to hold remaining funds in reserve to address ongoing estate tax obligations without disrupting cash flow.
Negotiating Favorable Terms
Focused on liquidity terms that balanced immediate needs with long-term business sustainability, including deferred payments and promissory notes to minimize cash-flow strain.
Aligning Family Objectives
Facilitated discussions among family members to align on a liquidity strategy and manage competing interests, keeping the business positioned for growth.
The sale of lazy assets generated liquidity to fund partial buyouts for G2 members exiting the business and reserve cash for estate tax obligations. This approach balanced the family’s immediate financial needs with the company’s long-term growth goals.
For personalized guidance on your family business liquidity needs, contact Interchange Capital Partners.
Interchange Capital Partners, LLC is registered as an investment adviser with the Securities and Exchange Commission (SEC). This communication should not be deemed as an offer or solicitation to buy or sell any product. Interchange Capital Partners, LLC does not provide legal, tax or accounting advice. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability.
