Entrepreneurs and corporate executives put an immeasurable amount of time and energy into building their businesses. They also take on a significant amount of financial risk because a majority of their net worth is represented by company equity, which often is illiquid and highly concentrated.

Selling a company, taking a company public, executing a dividend recapitalization, or other so-called “liquidity events” represent what often are once-in-a-lifetime opportunities for business owners and executives to turn their concentrated equity positions into enduring, diversified wealth. Given the complexities related to taxes and potential SEC restrictions on various forms of equity and compensation that executives receive, careful planning is paramount when it comes to fully capitalizing on the opportunities related to liquidity events.

At Callan Capital, we have experience guiding business owners and executives through the process of understanding their compensation packages and thinking strategically about liquidity events. Below, we outline some of the best practices that clients should consider in the years leading up to a potential transaction, in the months immediately surrounding the transaction, and in the years following the transaction.

Pre-Transaction Considerations

In any aspect of wealth management, time is one of your greatest resources. This is especially true for business owners and corporate executives focused on maximizing the value of their equity. The earlier you start mapping out your vision for what you want to achieve financially and understanding your resources, the more flexibility and leverage you have in shaping the outcome.

  • Determine your “numbers”
  • Decide where you want your wealth to go
  • Test your assumptions (scenario planning)
  • Understand your executive compensation package
  • Start the clock on long-term capital gains
  • Take advantage of valuation discounts

During the Transaction Considerations

The months leading up to a merger, IPO, or recapitalization can be very stressful for business owners and the executive team. In addition to your regular responsibilities of keeping the business running smoothly, you have to carve out a large amount of time to work with your investment bankers, attorneys, and accountants to prepare for and execute the transaction. This can include preparing the financial statements and market reports that potential acquirers or investors will need to conduct their due diligence, giving management presentations, conducting roadshows, and, in the case of an IPO, preparing the S-1 filing. As important as these tasks are, you need to also be thinking about the wealth management aspects of the transaction during this exciting time.

  • Coordinate your team of advisors
  • Minimize the tax impact
  • Identify restrictions on your equity
  • Consider implementing a 10b5-1 plan

Post-Transaction Considerations

Now that the transaction has been completed, your focus, from a wealth management perspective, can shift to implementing the strategy—and most importantly, enjoying the fruits of your hard work and passion.

  • Turn concentrated equity positions into a diversified portfolio
  • Build a philanthropic legacy … and reduce your taxes
  • Educate your family about wealth
  • Be nimble and flexible

Working With Specialists

Navigating the complexities related to executive compensation and liquidity events requires a high degree of specialized expertise among your team of advisors. There are many potential pitfalls that, if not managed properly, can have major implications in terms of taxes and risk in your portfolio. At Callan Capital, we specialize in guiding business owners and executives through these complex and critically important times in their financial lives.


Important Disclaimers: Callan Capital does not provide individual tax or legal advice, nor does it provide financing services. Clients should review planned financial transactions and wealth transfer strategies with their own tax and legal advisors. For more information, please refer to our most recent Form ADV Part 2A which may be found at www.adviserinfo.sec.gov.

The tax information provided in this document is for general informational purposes only—it is not meant to be used, and cannot be used, by individuals to avoid federal, state or local tax penalties. Taxation varies depending on an individual’s circumstances, tax status and transaction type; the general information provided in this guide does not cover every situation—for complete information on your personal tax situation, you should always consult with a qualified tax advisor.