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Here’s what SunTrust’s Tampa Bay market leader hears repeatedly from business owners

Margie Manning

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SunTrust at 3601 34th St. N. in St. Petersburg

A big turnover in business ownership is coming in the next five years, as Baby Boomer owners increasingly reach retirement age.

But many of the soon-to-be retirees don’t have a plan for selling or transitioning their companies, a survey by SunTrust found.

Tim Schar, Tampa Bay market president, SunTrust

“That’s one of the themes we hear over and over again, trying to think about what’s next in the life cycle of their business,” said Tim Schar, Tampa Bay market president for SunTrust Banks (NYSE: STI), one of the largest banks in the area.

SunTrust surveyed 500 U.S. business owners between 54 and 72 years old, with annual revenue between $5 million and $250 million. More than a third (36 percent) said they did not have a specific plan for how to transition their business.

The issue is especially significant in Florida, where about 50 percent of business owners are older than 45, according to the most recent data available from the state’s Small Business Development Center.

Schar, a veteran banker who has been in his current role since January, recounted repeated conversations with long-time business owners who built significant value in their companies just before the recession in 2008. That was a 10-year setback for many of the business owners, he said.

“Now they’ve finally got back to where they were. Real estate values have recovered, their business has done well, and now they’re at a point where they have to figure out what’s next.”

Schar understands why so many business owners don’t yet have a transition plan. Earlier in his career, he owned his own company, and just before he came to Tampa he was chief financial officer and chief compliance officer for ApplePie Capital Inc., a San Francisco-based online alternative lender for franchised businesses.

“Having been a business owner and executive, I know from personal experience that you spend all your time when you are running your business thinking about running the business,” Schar said. “I need to service clients, I need to buy more inventory or get more space or hire that next employee. I need to get more rest. Rarely do you say today is the day I will figure out the next 10 years of ownership or tax structure.”

There are lots of options, including staying in place and growing the business.

The sales option getting a lot of attention is a purchase by a private equity firm or a third-party investor. Forty-two percent of business owners surveyed by SunTrust have considered that type of sales, with 38 percent thinking about passing down the company to the next generation in the family and 18 percent contemplating employees buying ownership.

Private equity funds have raised a lot of capital they are eager to put to use, Schar said, although they tend to pursue larger companies.

“One thing we continue to hear from business owners is that they are getting lots of calls from private equity firms.”

Five years ago, those calls were more sporadic. Now the business owners get calls from private equity firms months after month.

“They’re also more sophisticated on determining which private equity firms they might want to work with,” Schar said.

At SunTrust, relationship managers work with the bank’s Business Transitions Advisory Group and its mergers and acquisitions team to figure out how to structure and value companies so they are prepared for a sale. Schar cited a recent example of how the various departments within the bank collaborated on a sale in the Tampa Bay area.

“We had a Tampa industrial company looking to buy other businesses that fit in their business model. Our SunTrust Robinson Humphry investment banker covering industrials engaged with them to talk to talk about all the different businesses they could look to acquire. That was over multiple meetings and multiple months. They narrowed it down to certain things they were interested in. We also knew there was a company that fit exactly one of those strategic initiatives based in Sarasota and we also knew, based on our engagement with that family, that they were interested sellers,” Schar said.

“We put them together. The Tampa company bought the Sarasota company. We financed the purchase, we advised the seller from a mergers and acquisitions perspective, and now that company is bigger and more diversified than it was before.”

The Baby Boomer business owners in the survey who said they are ready for the next phase of life are not yet done with business. Forty percent of those surveyed do not plan to fully retire, 26 percent would serve in an advisory capacity for their former company, and 15 percent would pursue a philanthropic opportunity in their retirement years, the survey found.

 

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