Every business transaction has an anatomy. The anatomy of each party needs to fit and work well together to achieve the goals of the new organism.
Aspen Grove Investments merged with Agri-Management Services LLC effective January 1, 2019. Aspen Grove has been a member of Agri-Management since 2015. After the merger we purchased Growthland Realty in Humboldt Iowa.
If you’ve read “Cashman’s Comments” over the years, you have no doubt picked up a consistent theme: planning for the ownership transition of your business. This merger is the culmination of my ownership transition planning and the beginning of executing that plan over the long-term.
Let’s walk thru our ownership transition planning process and the anatomy of this deal.
Objective: I had several objectives when I started business in 2008. I believe in the adage “never get into something unless you have an idea of how you’re going to get out”.
- It was important for me to create a business model that others would find valuable. This can be very difficult in a service business.
- I wanted to establish a level of customer service that would be a differentiating factor. It was critical to find or create a transition that would continue to build upon the services and level of service provided.
- I wanted a very long-term transition for myself. I very clearly inventoried myself and I know that I love what I do and wanted to continue with my work indefinitely. I also wanted to create a situation where I could control my time and schedule.
- I wanted to train a successor. I have had a few key mentors over my career that I am deeply indebted to. It is important to me to be able to pass along what I have learned to someone who wants to carry on the work that I’ve started.
- Financial security is a key objective. I grew up on a small family farm and have known financial insecurity. My wife and I have worked extremely hard and sacrificed to put ourselves in a position to make this transition. Arriving at a deal that cemented that objective into our retirement was critical.
- Finding someone with shared values was critical. I’ve met lots of people and seen lots of businesses. It is rare to find a fit wherein values are similar and trust exists. When you find a relationship with common values, you are a long ways toward developing a plan that can work.
The Anatomy of the Deal.
Let’s look now at how this deal fits my objectives
- Creating valuable model. This transaction resulted from a long-term relationship. I was hired by Agri-Management several years ago to develop and facilitate an ownership transition from father to son. That plan has been very successful and we are three years ahead of plan. A part of the plan that developed was to make Aspen Grove a Member of Agri-Management. We have created significant value within this relationship.
- Customer Service. I have been able to create a set of service offerings and a level of customer service that is valuable to my clients. Agri-Management Services has similar and complimentary services that dovetail very well with Aspen Grove.
- Long-term transaction. As part of this merger, we also bought Growthland Ag Realty in Humboldt. Our goal is to continue to grow our existing services and to offer new services desired by our customers. I will continue to provide leadership to the Aspen Grove brand, providing business valuation, brokerage and consulting services, while working with the overall company to achieve our growth and ownership transaction objectives.
- Training a Successor. A key part of our overall plan is to recruit and train successors for each of the LLC members. We believe we can double our volume and create new services while training a successor.
- Financial Security. Any ownership transition plan should include an assessment of financial security into the next phase of life. We constructed a long-term plan to defer capital gain taxes over a long period, a critical factor in this merger. I worked with my financial planner to be sure this plan dovetailed with my personal financial plan, and we secured life insurance on each member to fund a buyout agreement.
- Shared Values. Alignment of values is probably the most difficult objective to achieve. I was fortunate enough to have created a long-term relationship that allowed both parties to assess each other’s values and to see them in action.
We are very excited to have put together a plan that achieves all of our objectives. The resulting firm will be twice as large and we will have a team of experts that none of us could assemble on our own.
I hope this has been a good example of how an ownership transition plan can be created and executed. With the proper guidance, you can create the anatomy that can achieve your objectives too.