What is business succession planning?

Business succession planning is an ongoing process of recruitment, retention and regeneration that will increase the sustainability of your business. Succession events may be involuntary (e.g. death or disability) or voluntary (any other form of departure). Whilst a written agreement can assist with some of the legal consequences of these events, it is significant to also consider the human consequences, including client, business and family relationships.

Consider how prepared are you and your business to cope with either voluntary or involuntary succession events, both now and in the future?

The key elements of our process that differentiate us from other law firms are that we understand what it is our clients need and why, before we begin documenting the agreements.

Your legal circumstances do not exist in a vacuum outside of your personal situation. While most legal practitioners will be able to draft agreements which you may need to successfully navigate a succession event, we work with you to:

·         help you ascertain the future of your business, by working with you and your key stakeholders;

·         advise you on your options and help you make informed decisions;

·         help you to implement the most effective succession plan; and

·         help you navigate the process when a succession event arises.

A viable succession plan requires considerable thought and planning, prior to the actual documentation. This is where mdp McDonald Partners can assist you to:

·         identify the characteristics of possible successors to your business;

·         establish appropriate processes for attracting, selecting and developing suitable candidates;

·         identify and reconcile your personal aspirations and business aspirations;

·         recognise the needs and roles of all participants in the process;

·         research into the types of skills sets, financial resources and personality traits that future equity partners of your business should possess.

The succession planning process that mdp McDonald Partners offers ordinarily consists of three distinct phases:

1.      Exploratory

2.      Reviewing your documentation and structure; and

3.      Implementation

Stage 1: Exploring

This exploratory phase consists of three key components:

a.    Preliminary Meeting

The first component within this phase is normally a preliminary meeting with key people who have an interest in the business, such as directors and their spouses. Ordinarily, we would meet with each of these people individually and discuss their future role in the business and their lifestyle aspirations. The information and understanding we gain from the preliminary meetings will then help us to develop an agenda for the workshop. This ensures that the discussions in the workshop focus on the issues that are critical in the development of your succession strategy.

b.    The Workshop

During the workshop we will explore different options available to you and your current and future business partners. For example, these options may include selling your share of the business to your children in part or in whole, selling part of your share to another business or acquiring another business. Every option should be considered and we facilitate a broad ranging discussion that helps you make decisions about the future of your business.

Our aim is to ensure that the participants understand their options and make informed decisions. Some decisions cannot be made on the day and require more time and more information. We ensure that the participants make a commitment to following through with the workshop outcomes by providing an action list.

Once you decide where you want to be and when, we can help you identify what your business needs to get you there and why. We then help you to identify who you need: their skills, their financial resources and personality traits and how to find them and keep them.

c.    Valuation

It is also important to understand the value of your business – what it is worth now and what it is likely to be worth when you implement your succession plan. This is because it will have a major impact on how a future partner funds their entrance, whether that is either or both of your children, a current employee or an external party. This is not simply “their problem”. The incoming partners will be funding your retirement hence it is in your interest to understand how and when they will pay you for your share of the business.

Stage 2: Reviewing

Does your existing business structure give you the most tax effective exit strategy?

·         Do your existing business structure and your legal agreements allow for the entry of future partners?

·         Does your business plan reflect your succession plan?

A major part of this review is to consider the tax consequences of your existing structure and, if necessary, identify how a restructure will provide a more favourable tax outcome.

We also assess your personal asset protection strategy and advise on potential exposure. We can provide a range of future options that accommodate different individual risk profiles.

Stage 3: Implementing

·         Restructure your business to make it more attractive for future partners or purchasers.

·         Give yourself the most tax effective exit by restructuring.

·         Put in place legal agreements that genuinely reflect the agreed intentions of your and your partners.

If the review process in phase 2 reveals that you require a restructure, we can assist you with this process by incorporating new companies or establishing trusts. We can also assist you in the preparation of and execution of new documents that will be specifically drafted with your business in mind, which may include:

·         Sale and purchase agreements for newcomers

·         Documenting a succession plan

·         Shareholders agreement

·         Buy/Sell agreement

·         Wills

·         Powers of attorney

·         Employee share ownership plan

Once you have been through this process, your business will be worth more. Any business that has a plan to seamlessly deal with the departure of the principal is more appealing to investors. That is, the business you run will be worth more because it will no longer be so heavily reliant on your individual presence.

Business Succession Planning Publications

·         Case Study: First National Real Estate succession planning project

Where to now?

Speak to an expert

Often the best way to get the answers you need is to speak to an expert. Click here to contact one of our experts via our contact forms or please call us on +61 3 9620 9660.


Attend a seminar

If you would like to book an information seminar please click here.


Organise an initial consultation

A face-to-face consultation gives you the opportunity to discuss your issue with professionals who deal with and resolve these issues on a daily basis.

It gives you a chance to ask any questions you may have and for a member of our team to gain background and provide an insight into the options available to you.

For more information please call us on +61 3 9620 9660 or send us an e-mail at info@mdplaw.com.au. We are here to help.