West Visayas State University

College of PESCAR
Graduate School

Succession Planning
and Strategies for Harvesting
and Ending the Venture

A Report Summary

Presented to:

DR. MARIO TAJANLANGIT

Professor

In partial fulfilment of the requirements of the course

(MMEd 503) Music Entrepreneurship
Leading to the degree
Master of Music Education (MMEd)

by:
FRANCIS A. PEÑARANDA
 OPENING PROFILE

Teresa Cascioli is one of

Canada’s top business minds. She
is the daughter of Italian
immigrants and a Commerce
graduate from McMaster
University in Hamilton, Ontario.

As the former CEO of Lakeport Brewing she took the company

from bankruptcy to a $201 million sale to Labatt in just eight years.
Her tenacious tactics saw her lead one of Canada’s most successful
income trust public offerings.
This award winning
entrepreneur has been
featured on Profit and
Chatelaine Magazine’s lists of
Canada’s most successful
women and has been named
one of the Women’s Executive
Network Top 100 Canada’s
Most Powerful Women.
 She was awarded Entrepreneur of the Year by Canada’s
Venture Capital and Private Equity Association as well as by Ernst
& Young in their Turnaround Category. She was inducted in the
Sales Hall of Fame by the Canadian Professional Sales Association.
In 2012, Cascioli was awarded the Queen’s Diamond Jubilee Medal.

Teresa served as Strategic Advisor to Labatt and KPMG. Today, in

addition to writing, she is a motivational speaker that inspires,
energizes and empowers other entrepreneurs to seize
opportunities and challenge the status quo. She devotes her spare
time to charitable causes. She has donated in excess of $6 million
to her community, including the funding of McMaster University’s
Chair in Entrepreneurial Leadership. Her charitable leadership
earned her the title of Philanthropist of the Year in her community.
 EXIT STRATEGIES

Advice to Intrapreneurs

1. Facing facts - The first thing an entrepreneur must do is

face the “brutual facts”.

2. Telling employees - The next important step is to manage

stakeholders, with staff being one of the most important.

3. Communicating with creditors - Another important

stakeholder that needs to be managed during times of
business crisis is the banks and creditors.

4. Manage emotional well-being - Managing your own state,

your emotions, your thoughts, and your own well-being.
Initial Public
Offering (IPO)
- Initial public
offering or stock
market launch is
a type of public
offering in which
shares of a
company are sold to institutional investors and usually also
retail investors; an. IPO is underwritten by one or more
investment banks, who also arrange for the shares to be
listed on one or more stock exchanges.

Private sale of
stock. Sell the shares
back to the company.
The easiest way to sell
shares of privately held
stock is to get the
company that issued
them to buy them back.
Succession by a
Family Member or a
non-family member.
Family business
succession is the
process of transitioning
the management and
the ownership of the
business to the next
generation of family members. The transition may also include
family assets as part of the process.

Merger
with
another
company.
When you
merge your
business with
another
business or businesses, you consolidate two or more companies
into one. You can compare a merger to a marriage. The companies
involved in the merger join their assets, staff and other resources
together, forming a new legal entity.
Liquidation in finance and
economics is the process of
bringing a business to an
end and distributing its
assets to claimants. It is an
event that usually occurs
when a company is
insolvent, meaning it cannot
pay its obligations when they
are due.

SUCCESSION PLANNING TIPS

 SUCCESSION OF BUSINESS

Transfer to Family Members

 Role of owner - full-time/part-time/retire.
 Family dynamics.
 Income for working family members and shareholders.
 Transition business environment.
 Treatment of loyal employees.
 Tax consequences.

Transfer to Nonfamily Members

 Train a key employee and retain some equity.
 Retain control and hire a manager.
 Sell the business outright.

OPTIONS FOR SELLING THE BUSINESS

Direct Sale
 Strategies to be considered:
 Focus on a narrow, well-defined segment.
 Control costs and focus on higher margins and profits.
 Get all financial statements in order.
 Prepare a management documentation.
 Assess the condition of capital equipment.
 Get tax advice.
 Get nondisclosures from key employees.
 Try to maintain a good management team.
 Prepare and plan in advance.
 An important consideration is the type of payment the buyer
will use.
 Business brokers may be helpful.
 The best way to communicate the business to potential
buyers is through the business plan.
 The role of an entrepreneur may vary depending on the sale
agreement or contract with the new owner(s).

Employee Stock Option Plan

 Establishes a new legal entity—an employee stock ownership
trust.
 Obligates the firm to repay the loan plus interest out of
business cash flows.
 Results in significant stock values for employees.

Advantages
 Motivates employees to put in extra time or effort.
 Provides a mechanism to pay back loyal employees.
 Allows transfer of business under a planned written
agreement.
 Permits the company to reap the advantage of deducting
contributions on ESOP or any dividends paid.
 Management Buyout
 Usually involves a direct sale of the venture for some
predetermined price.
 To establish a price, the entrepreneur should:
 Have an appraisal of all the assets.
 Determine the goodwill value established from past revenue.
 Sale of a venture can be:
 For cash.
 Financed through banks
 Through sale of voting or nonvoting stock.
 The entrepreneur may agree to carry a note.

BANKRUPTCY—AN OVERVIEW

Bankruptcy lessons:
 Too much time and effort are spent on diversifying in
markets where entrepreneurs lack knowledge.
 Bankruptcy protects entrepreneurs from creditors, not from
competitors.
 It is difficult to separate entrepreneurs from the business.
 Entrepreneurs should file for bankruptcy early.
 Bankruptcy needs to be shared with employees and
everybody else involved.
 Legal Basis
 Fair distribution of assets to creditors.
 Protection of debtors from unfair depletion of assets.
 Protection of debtors from unfair demands by creditors.

 Courts try to give the venture “breathing room” to pay

its debts.
 A plan for reorganization is prepared and approved by
the US Bankruptcy Court.
 Decisions made reflect one or a combination of the
following:
Extension - Postpone claims.
Substitution - Exchange stock for debt.
Composition settlement - Debt is prorated to
creditors as settlement.

Surviving Bankruptcy
 Bankruptcy can be used as a bargaining chip to voluntarily
restructure and reorganize the venture.
 File before failure of cash or revenue.
 Chapter 11 should be filed only if a chance of recovery
exists.
 Be prepared for examination of transactions for fraud.
 Courts try to give the venture “breathing room” to pay its
debts.
 A plan for reorganization is prepared and approved by the
US Bankruptcy Court.
 Decisions made reflect one or a combination of the
following:
 Extension - Postpone claims.
 Substitution - Exchange stock for debt.

 Composition settlement - Debt is prorated to creditors as

settlement.
 Courts try to give the venture “breathing room” to pay its
debts.
 A plan for reorganization is prepared and approved by the
US Bankruptcy Court.
 Decisions made reflect one or a combination of the
following:
 Extension - Postpone claims.
 Substitution - Exchange stock for debt.
 Composition settlement - Debt is prorated to creditors as
settlement.

-End-