After the sale - managing newly monetized wealth

When a business owner sells their company, it represents the culmination of years of hard work, worry and sacrifice, and the financial reward of all that devotion can be significant.

Yet as welcome as that large “monetization event” may be, it can also be disorienting, says Kevin Dehod, President and CEO of CWB Wealth Partners, a subsidiary of CWB Wealth. “They may have all this cash liquidity,” he adds, “but when they start to digest what the next phase of their life will be, it’s often a little bit overwhelming."

It doesn’t have to be that way. As a financial partner committed to helping business owners, CWB is uniquely positioned to support them through the entire mergers and acquisition (M&A) journey—from planning and financial readiness to the sale of the company (through its alliance with boutique deal and valuation advisory firm Sequeira Partners) and, finally, to the after-sale period, when owners find themselves with a new challenge: wisely managing their newly monetized wealth.

CWB Wealth is a big part of that end-to-end support, providing private wealth advisory and investment management to high-net-worth clients. Dehod brings a valuable perspective that former business owners can relate to: he has co-founded and sold a company with his partners, too. “I understand how business owners think, and I know what their expectations are,” says Dehod. “Clients that are going through this process can talk to me and know that we’ve had very similar experiences. There are important decisions to make and very real emotions involved. I think they appreciate my perspective because I’ve been there before.

Transitioning from owner to investor 

You might assume that after starting and operating a successful business for years, making the transition out of the company would be relatively easy. After all, former owners typically emerge from a sale with a substantial nest egg and the financial freedom to do whatever they want to do. Yet the reality is often more complicated.

Many entrepreneurs are driven and ambitious, Dehod notes, always looking for new challenges and opportunities to grow. They move fast. And most of the successful ones are not afraid of risk. Yet those positive attributes can work against them when they leave the world of entrepreneurship and enter the world of investing, where patience, long-term thinking and careful risk assessment tend to be rewarded.  

“Entrepreneurs are used to controlling their destinies through their businesses,” Dehod says, “but when you invest in the financial markets, you lose complete control. You’re subject to market volatility, and it really is a massive adjustment.”

The transition from owner to investor, he explains, is not just a job change: it’s also a change in mindset. One of the first things Dehod tries to impress upon former owners is, simply put, to slow it down and take the time to ensure they are investing wisely. After all, for many if not most of them, the capital they have realized from the sale will be used to fund their retirement goals and will have to last the rest of their lives—making wealth preservation a top priority. “I counsel them that there’s no rush to get this capital invested,” Dehod explains. It takes time to properly allocate substantial wealth, he adds, and that requires patience.

A different perspective on risk

The second big change is about expectations. Ensuring long-term wealth often requires business owners to shift their perspective on risk and return. As entrepreneurs, they might have been willing to take relatively high risks to generate, say, double-digit profit margins. Dehod says that changes after selling, “because in place of your business, your investment portfolio becomes your main cash flow generating machine. We need to be mindful of the risks you’re taking.”

When investing for the long haul, however, anticipated returns tend to be much lower, as does risk; even conservatively managed capital pools, invested prudently, may provide a steady (and substantial) income. “Many of the people I work with would never be happy with a 7% rate of return in their business, but they don’t have the business anymore,” Dehod says. “I help them to understand that it’s OK to generate that kind of return from investments, to think about the future—for their spouse, their kids, their grandkids—and about generating a legacy.”

Some clients, he adds, don’t care much for public financial markets, which they find “kind of boring” and where they lack control over results. Combined with their passion for new opportunities, that can lead them to pursue investments such as start-ups or private equity, which lets them contribute expertise, energy and time and hold the potential for outsized returns. Yet Dehod cautions that they need to realize that such investments tend to be riskier than publicly traded securities and allocate accordingly.

“It’s OK to take some high risks, but if you have $25 million, then let’s play with $1 million of it, for example,” he adds. “You don’t need to take all of it and scatter it into a bunch of private businesses just to keep busy. Let’s do it in an organized manner, with a small amount of capital.”

Besides risk mitigation potential, he says, the financial markets also have one big advantage over private equity: liquidity. Investing in private equity, for example, can mean not being able to draw down on invested capital for several years. In contrast, when investing in public markets, “you can get your hands on your capital in three days,” Dehod says. “Yes, you can’t control public markets, and sometimes they’re not fun. But the one thing they offer is liquidity, and that’s worth a lot.”

In an ideal world, how a former owner invests the capital from the sale of their business would be aligned with well-thought-out retirement and estate plans, ensuring a smooth transition. Yet in the real world, that is often not the case. It’s not just from lack of planning—sometimes an owner sells because of unforeseen health or personal reasons, and sometimes an unsolicited offer proves just too good to refuse.   

Planning for success

So, one of the first tasks for Dehod and his team is to work with clients to adapt their current plans to their new circumstances. “One of the biggest things to look at is the will,” he says. “Does it need to be updated now that your net worth has changed?” CWB Wealth and other experts at the bank can also assist in developing estate strategies, such as setting up tax planning and charitable giving, and they will guide the client through the process of long-term financial, retirement and tax planning. And when managing the client’s investments, CWB Wealth advisors can make use of not only its own solutions (such as private investment pools), but also asset classes such as private credit, infrastructure, real estate and private equity.

That reflects the holistic and flexible approach CWB offers, and it’s particularly beneficial to former business owners, who often have large sums of capital at stake and a host of new challenges to navigate. Knowledgeable, engaged and informed, CWB Wealth advisors not only provide but also coordinate advice and opportunities—keeping the focus squarely on the clients’ needs.

“The great thing about CWB Wealth,” Dehod explains, “is that I am free to act like a kind of quarterback, with one goal: to get the best solution for the client.”