Succession Planning…

Earl R. Hall, Executive Director – Syracuse Builders Exchange

Succession planning is never easy and generally not a topic construction industry employers want to think about – until they have to.  In my tenure as Executive Director of New York’s largest construction industry Association, I have assisted employers during their succession planning exercise, which has provided perspective on our members and what options they evaluate as they prepare to assure their business continues. 

Hanging up one’s hard hat for the last time should be a rewarding experience.  Whether you are a business owner, superintendent, foreman or journeyman, reflecting on your career and the industry you leave behind will generate a wide range of emotions.  For business owners, knowing you have a succession plan will provide peace of mind, financial security, and a sense of accomplishment, especially if family is involved in the plan.

Professionals such as accountants, attorneys, bankers, and investment advisors should be engaged during the due diligence process.  Obtaining professional advice is essential in developing a plan, identifying potential options, and avoiding unforeseen issues which might adversely impact the execution of a succession plan.   Additionally, such advisors will help one navigate how to implement the succession plan and what role, if any, the business owner will have during and/or after the transition.

Understanding the assets and liabilities of the business is essential, keeping in mind the company’s greatest assets may be the leadership team and employees.  Identifying potential successors to transition the business in many cases comes from within, so explore such options with those within the company, including employees and family members.  Communicating with those employees and/or family members will provide valuable feedback relative to interest in exploring a succession plan.  From there one can determine whether or not a business consultant or broker may be necessary to identify additional external options.

When to begin exploring a succession plan may vary depending on a range of unique facts and circumstances, so developing a plan with an adequate time frame is essential to obtain goals and objectives.  Planning for the unexpected is being proactive, so working with the company’s executive leadership team, family members and professionals will provide an initial strategic road map for the future.  While there is no certain age to begin succession planning, one should always have at a minimum a business plan in place which would address the “unexpected” event that would impact the ownership of a business.

While the process of succession planning may be similar for all construction industry employers, those employers’ signatory to one or more construction collective bargaining agreements must be aware of potential issues.  Such issues may impact one’s ability to sell the business and/or transition the business to family members.

Union contractors will need to evaluate the termination dates of all collective bargaining agreements and determine how such agreement may or may not impact a succession plan.  Generally, in a business transition or new ownership situation, existing collective bargaining agreements are also transitioned to the new owners of the business, unless the agreements have been properly terminated. Obtaining advice from an attorney familiar with the construction industry and labor agreements will be critical to assist in the decision-making process.

In determining whether or not terminating one or more collective agreements is necessary to effectuate the succession plan, one should consider the impact of any employer withdrawal liability relative to a signatory union’s pension fund or funds.  Determining the employer’s unfunded withdrawal liability should be done by requesting the union pension fund actuary calculate the employer’s withdrawal liability in the event such is triggered by terminating the collective bargaining agreement.  This disclosure may impact the decision-making process or impede one’s ability to implement a preferred or potential succession plan.

Developing a succession plan can be an arduous exercise; however, it is necessary if the desire is to continue the business in the unlikely event of an unexpected matter or while considering retirement.  Surrounding yourself with a great support team of professionals and other invested individuals who care about the employer will pay dividends during the succession planning process.