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Advice on change of ownership

K

KRob

Member
Joined
Sep 1, 2010
Messages
20
Location
Germany for now, E. Oregon originally
I am looking for advice or information on passing places on?

Background--I am currently in the service over seas i will be going home on leave in May to talk to my former employer about taking over his place. We have been talking about this for several years but nothing really hard.

The gentleman is getting pretty old so time for a slow buy out is not really an option. My big hold up right now is i do not like talking about it over the phone to him so i try not to ask him a whole lot of questions which results in me knowing very little about his operation is constructed (LLC, S-Corps, etc)

Thus i am looking for any kind of advice covering all the bases also places that i could read up more. Also if you know any decent books that cover it too that would be great.

Thanks
Rob
 
Get Everything that you talked about in writing (terms, price, mineral intrest, water rights etc.). Have a lawyer come up with some sort of purchase contract or something like that. It can have all your bases covered but I think the most important thing is get it in writing.
 
I am not a big fan of lawyers, but this is the place to use them. By the way, it got so cold here last month that I saw a lawyer with his hands in his own pockets! No joke, find some good legal advice. ours is cheaper, and worth all it costs.
 
Yeah as much as i hate the lawyer part my father lost out on a house because it wasn't in writing and just on hand shakes...and then the kids got involved after the gentlemen's death.

Ok i know nothing about Lawyers/Accountants...are their specific types of them that i am looking for? Or are general Lawyers and accountants good...my guess is no you want them specialized but im asking.
 
A slow buy out is not an option only if the current owner says it's not an option. I'd not take anything off the table unless and until he is adamant about it. Remember, some people believe (or like to believe) that they're going to live forever.

I purchased the company I worked for from the owner via a structured buy-out using the very same profits of the company. In other words, we did a deal where I had all the incentives to increase sales and reduce costs in order to pay him off as quickly as possible. And since this was a stock purchase, we structured the deal such that with each year's payout to him, a certain percentage of the shares became mine. Even if the deal finally collapsed because I couldn't complete it, I still owned a percentage of the company.

I did finally buy-out the company completely but that was on the day another company bought it from me in another stock purchase deal. I walked away with their shares (NYSE-traded company) and they controlled my company.

Can you provide any more details about the nature of the business you're interested in trying to buy? When negotiating a buyout of a one-owner operationl, the world is wide-open. Take advantage of that.
 
KRob said:
Yeah as much as i hate the lawyer part my father lost out on a house because it wasn't in writing and just on hand shakes...and then the kids got involved after the gentlemen's death.

Ok i know nothing about Lawyers/Accountants...are their specific types of them that i am looking for? Or are general Lawyers and accountants good...my guess is no you want them specialized but im asking.
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My advice is to not get a lawyer involved until you and owner have agreed to terms. Lawyers only muck things up before that point IMHO.

A good accountant will tell you if the terms of the deal will pass muster with the IRS as well as giving advice on the tax implications of various strategies. Again, my advice is that, if possible, only you and the owner first work out terms that work for both you of you. Thereafter, the legal and tax details can be discussed with professionals.
 
Find someone in your location that has done this and ask who they have used and if they were pleased. Ask the fella who is transfering ownership who he trusts. If ya see red flags in the process, pay attention. Personally I am a big fan of bathing the whole process in prayer for guidance from the one who clearly sees the whole picture.
 
Ok more background....this is a 400 mother cow operation, on around 5000 acres. At this point it only him and his wife the children all dieing off over the years. He is almost 80, and in pretty rough shape.

This is what i would like to come out of it. I would like to take over the place from him but make sure that he stays their to guide and mentor me. The place having two houses so that is not an issue.

I guess the best way to do this is to have me pay the mortgage to him and his wife and when they both pass on have the rest of the mortgage wiped clean. That is what i am hoping...will he bight? will it legally be possible? But i got to see how much he is willing to play when i go home.

If he is not willing to deal i will stay in the military since i have a pretty promising career in front of me and also would give me time to build up an account to start my own place later.

I have been in the military three years now and he sad thing is the majority of the time i am not working i am thinking about this. This is all i have wanted to do since i left. Luckly my wife is pretty keen on it, the gentlemen wants his place to stay a cattle operation and i think both of us have been praying on this for awhile.

Thanks
Rob
 
KRob said:
Ok more background....this is a 400 mother cow operation, on around 5000 acres. At this point it only him and his wife the children all dieing off over the years. He is almost 80, and in pretty rough shape.

This is what i would like to come out of it. I would like to take over the place from him but make sure that he stays their to guide and mentor me. The place having two houses so that is not an issue.

I guess the best way to do this is to have me pay the mortgage to him and his wife and when they both pass on have the rest of the mortgage wiped clean. That is what i am hoping...will he bight? will it legally be possible? But i got to see how much he is willing to play when i go home.

If he is not willing to deal i will stay in the military since i have a pretty promising career in front of me and also would give me time to build up an account to start my own place later.

I have been in the military three years now and he sad thing is the majority of the time i am not working i am thinking about this. This is all i have wanted to do since i left. Luckly my wife is pretty keen on it, the gentlemen wants his place to stay a cattle operation and i think both of us have been praying on this for awhile.

Thanks
Rob
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Go tell him what you have in mind. You're asking a lot. There are life insurance policies that would take care of the price of the ranch but the premiums might be just as high as the ranch, I don't know.
 
redrobin said:
KRob said:
Ok more background....this is a 400 mother cow operation, on around 5000 acres. At this point it only him and his wife the children all dieing off over the years. He is almost 80, and in pretty rough shape.

This is what i would like to come out of it. I would like to take over the place from him but make sure that he stays their to guide and mentor me. The place having two houses so that is not an issue.

I guess the best way to do this is to have me pay the mortgage to him and his wife and when they both pass on have the rest of the mortgage wiped clean. That is what i am hoping...will he bight? will it legally be possible? But i got to see how much he is willing to play when i go home.

Thanks
Rob
Click to expand...
Go tell him what you have in mind. You're asking a lot. There are life insurance policies that would take care of the price of the ranch but the premiums might be just as high as the ranch, I don't know.
Click to expand...

I can about imagine what a term life policy on an 80 year old man would cost.....if they're even available.

Rob, when you talk about a mortgage, does he have a mortgage on the place or does he own it outright? If he does have a mortgage, his dying isn't necessarily going to "wipe it clean" unless he carries life insurance that his wife or estate would then use to pay off the mortgage.

And that brings up another issue. What about his wife after his death....assuming he dies before her?

In the end, you'll need to come up with some sort of offer to him that will beat him just doing an outright sale to someone and walking away with the cash. At his age, perhaps a deal whereby you cover the costs of whatever mortgage is in place (assuming there's one) and some extra payment to him to help "manage" the place would be attractive to him. That puts the money-management responsibilities on your shoulders but also keeps him actively involved in the business.....which I'm assuming is something he desires.

I suspect most persons in his position would rather see something they've built over the years passed on to someone they know and trust as opposed to just being sold to some stranger or sold after their death. If you think those ideas motivate him as well, then develop a plan that fits that motivation.
 
this advice and info was passed to me several years ago.so i will pass it on.its free and hasn't cost me anything.

first,when seeking a doctor,banker or lawyer,,,try to locate a Christian in that line of work.
once u find that Christian lawyer,maybe all parties involved can meet at one time.visions and outcomes of the future can be decided by all then put on paper.
there are wills,living wills,trusts,contracts and insurance,,,,but find a proven Christian lawyer.
 
There is a tax break that he can get by selling land to a beginner rancher/farmer which might help get his attention. Now I dont know if your looking at trying to buy that land from him in time or what but that could be a way to go. Now if your trying to get the land by just working for him or helping him out now that might be hard to sell to him. With what your are explaining I dont see anything illegal about it.

I know most people dont like lawyers but you got to have one in this case. I would hate to put faith in what he says and go to all the work and then lose everything because he had a change of heart or in the worst case dies before this thing really takes off. Then its your word and no one else. It sounds like it could be a pretty good deal to get into if every thing works out. Its tuff to get started from scratch if you dont have something like that to walk into. Thats how I was able to get started and its working out for me so far. Good luck!!
 
I'd have a talk with him see what he's thinking after that it may be decided for you one way or the other.

I tried buying my uncles place a few times in the last few years. He's got it overpriced by about a $1000 an acre for the area.

At christmas he said I should make him an offer but knowing him I did'nt bother. In january he began running a fever and as of Friday The Dr's give him 2 weeks to 2 months to live.My Dad thinks I should go talk to him about it but knowing him I still won't bother it's not worth it to me. I'd feel like a vulture waiting for him to die I'd rather not have it in that case.I will go see him but just to visit. I'd love to have the place but I can see the Greed coming out of the family already and I want no part of it.He has no building's other than a older mobile home and a broken down set of corrals with 2 wells on the place.Fences are poor to okay on the perimeter single hot wire cross fences.I'm sure lawyers and the county will divide it up in the end.
 
Denny said:
I'd have a talk with him see what he's thinking after that it may be decided for you one way or the other.

I tried buying my uncles place a few times in the last few years. He's got it overpriced by about a $1000 an acre for the area.

At christmas he said I should make him an offer but knowing him I did'nt bother. In january he began running a fever and as of Friday The Dr's give him 2 weeks to 2 months to live.My Dad thinks I should go talk to him about it but knowing him I still won't bother it's not worth it to me. I'd feel like a vulture waiting for him to die I'd rather not have it in that case.I will go see him but just to visit. I'd love to have the place but I can see the Greed coming out of the family already and I want no part of it.He has no building's other than a older mobile home and a broken down set of corrals with 2 wells on the place.Fences are poor to okay on the perimeter single hot wire cross fences.I'm sure lawyers and the county will divide it up in the end.
Click to expand...

I think your dad is right.
 
Just from what you have mentioned on your post, It looks like you are asking for or expecting quite a lot, that would be in your favor. You should talk to other sellers to get a better idea of what a seller might expect.

I am at the age where am ready to quit ranching. I have had several nibbles of people who would buy. Most would buy on a contract paying over 20 or 30 years. IF I should die the contract would go on to my heirs and they would still get the payments. Most who have made offers have no money for a down payment and wouldn't want to make the first payment for a year. I could not do that. I would want a sizable down payment for at least two reasons. First I would want some money to hold on reserve in the event I would get sick or would have to go into a nursing home. A persons savings today dissappear mighty fast.

I would also want who ever bought my land to have to put up something at his risk, so if things went bad he would not be as able to just pull up stakes and leave.

Before you work out a deal, both seller and buyer should have their separate lawyers who might forsee and avoid any pitfalls that might arise.

Just my thoughts from a sellers point of view. It seems today there are so many people who expect you to work out a good deal for them.
 
Alright....where to start....i appreciate all the advice.

Whitewing

He owns the place out right so the mortgage part would be what i owe him. I think on that point i could make it attractive to him because i want him to stay on the place to guide and mentor me. Which would allow him to stay in his current house for as long as he needs. Additionally i should use they not him because it will be a deal worked with both of them.

Whitewing said:
I suspect most persons in his position would rather see something they've built over the years passed on to someone they know and trust as opposed to just being sold to some stranger or sold after their death. If you think those ideas motivate him as well, then develop a plan that fits that motivation.
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I think what you have said above, fits his wants and desires which is why i am hoping for some kind of good arrangement for me.

Clarencen said:
Just from what you have mentioned on your post, It looks like you are asking for or expecting quite a lot, that would be in your favor. You should talk to other sellers to get a better idea of what a seller might expect.

I am at the age where am ready to quit ranching. I have had several nibbles of people who would buy. Most would buy on a contract paying over 20 or 30 years. IF I should die the contract would go on to my heirs and they would still get the payments. Most who have made offers have no money for a down payment and wouldn't want to make the first payment for a year. I could not do that. I would want a sizable down payment for at least two reasons. First I would want some money to hold on reserve in the event I would get sick or would have to go into a nursing home. A persons savings today dissappear mighty fast.

I would also want who ever bought my land to have to put up something at his risk, so if things went bad he would not be as able to just pull up stakes and leave.

Before you work out a deal, both seller and buyer should have their separate lawyers who might forsee and avoid any pitfalls that might arise.

Just my thoughts from a sellers point of view. It seems today there are so many people who expect you to work out a good deal for them.
Click to expand...

Clarencen, i appreciate your comments. I understand that what i envision is overly advantageous to myself. Which in all honesty i do not expect it to go as well for me. HOwever you brought up a couple of real good points especially the larger down payment. Though he doesn't have to worry about me pulling out when it gets tough the other portion about being sick and nursing homes is very good point. The issue for me in that equation is that is not possible for me without a loan from somewhere else. However beggars cant be choosers.

I really appriciat all the comments especially from the sellers point of view that forces me to look at it from the other side.
 
KRob, now we're making progress with the additional information you've provided. And as others have stated here, you need to prepare yourself to think not only from your personal position, but also to put yourself in their shoes.

Since they own the place outright (and you assume there's no mortgage in place) one option will clearly be for them to act as "banker", financing the place for you. What advantage would that be to them? I can think of 3 key elements that might be important to them.

1) To consider that option, they'd have to be reasonably sure that they'd be able to gain more over time than an outright sale in today's market.

2) If they're motivated by the thought of the place passing on to someone they already know and trust, offering financing to their person-of-choice would be one way to accomplish this goal.

3) If there's a desire to stay on in some compacity, overseeing the operation, and knowing that they have a home available to them for the remainder of their lives, this too could be an important element in their decision making process.

Having said all of the above, I think if you're serious, you'd be in the strongest position upon arrival at the bargaining table if you had some sort of downpayment already in hand.....something. Sure, arriving with the will and desire to make it work is good, but money talks, will get their attention, and demonstrate that you're serious about the venture.

Have you any idea what the place is worth today? If not, you need to know this before you can move forward.

Good luck.
 
Denny said:
I'd have a talk with him see what he's thinking after that it may be decided for you one way or the other.

I tried buying my uncles place a few times in the last few years. He's got it overpriced by about a $1000 an acre for the area.

At christmas he said I should make him an offer but knowing him I did'nt bother. In january he began running a fever and as of Friday The Dr's give him 2 weeks to 2 months to live.My Dad thinks I should go talk to him about it but knowing him I still won't bother it's not worth it to me. I'd feel like a vulture waiting for him to die I'd rather not have it in that case.I will go see him but just to visit. I'd love to have the place but I can see the Greed coming out of the family already and I want no part of it.He has no building's other than a older mobile home and a broken down set of corrals with 2 wells on the place.Fences are poor to okay on the perimeter single hot wire cross fences.I'm sure lawyers and the county will divide it up in the end.
Click to expand...

Go see the uncle. He may want to keep the land in ranching and still provide for his offspring to a degree. I wish you the best of luck and hope you both find common ground and come to an agreement.
 
I know just where you stand. About 60 years ago I was standing before the same solid wall that you are today. If you do not have anything to put down on a lace it is hard if not impossible to find a lender who would take a second mortgage on something bought on contract. I never owned a piece of land until I was 43 years old.

My Dad owned a small place that was paid for. He was about 55 years old and still needed it to make a living and raise the rest of his family. He had no cash reserve to help out. He often accused me of trying to reach to far from where I was. As it turned out I stayed here on the family farm helping out as Dad became older. Mostly I was just puttering along, but opportunities, just small cracks really, did appear. I always put my un-need profits back into my business.

You are talking about a place that will run about 500 cows. Just from here, it looks like a couple million dollars just for the land. Quite a bite from my point of view.
 

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