A model story from practice. This story brings together several situations we deal with repeatedly. It is not about one particular client.
In mid-April an amount he had until then only seen in a purchase contract landed in his account. Somewhere between thirty and sixty million crowns.
For twenty years he had run a manufacturing company. He knew his product, his customers, his employees and his numbers. He knew where the company made money, where risk came from and which decisions he could influence himself. After the sale, a large part of the wealth he had held in his own company turned into money in an account within a short time. And with it, his role changed too.
As an entrepreneur he knew how to create capital. Now he had to decide how to look after it over the long term.
The offers came quickly. His bank called with an investment solution of its own. A property agent came with three apartments. Through acquaintances he was offered a private equity investment.
Each of those options could have made sense on its own. What was missing was an answer to a more important question: how were they all supposed to fit into his wealth as a whole?
So he did not come to the first meeting looking for the investment with the highest expected return. He needed a framework for deciding about the capital he had just received.
First the whole estate, then the investments
Selling a company is a particular moment from the point of view of wealth management. An entrepreneur may hold a large part of his wealth for many years in a single asset that he understands well and can influence directly. After the sale he gains a lot of liquidity, but he also has to start making decisions in an environment with different rules.
That is why we did not start by picking investments.
We first looked at his wealth as a single whole. We mapped the existing investments, property, other business activities and the proceeds from the sale.
We wanted to know which part of the capital he wants to keep available over the long term, what withdrawals he may expect in the future, what horizon the individual parts of his wealth have and what level of fluctuation he can accept.
Only then did the investment strategy start to take shape.
Every part of the capital was given a role
One part of the money stayed liquid. That gives him room for future personal and business decisions without having to touch the long-term investments.
The main part of the capital was given a long-term horizon. We built the portfolio across different asset classes, regions and currencies, so that its outcome does not depend on one market or a single investment scenario. The proposal also set out the level of risk and the expected fluctuation in advance.
We worked separately with the part of the capital where the client could accept lower liquidity and a longer horizon. Investments like these can have their place in the overall structure, as long as it is clear in advance what role they are meant to play.
The result was not a list of products. It was a structure in which every part has a specific job.
What we did not do, and why
We did not judge the bank offer on its own, but in the context of the whole strategy. Going through it in detail, the client found that he could not explain well how the product would behave in different situations or what function it would have in his portfolio. It was therefore not included in the final solution.
We did not buy the apartments either. The client already had significant exposure to the property market and another purchase would have concentrated his wealth further.
The conversation about property did open another topic, though. It turned out he wants to use part of the capital in business again in the future. The strategy gave that its own space and a clearly defined size. A new business project can be part of his wealth without determining the fate of the whole portfolio.
What changed
In the end the biggest change was not the composition of the portfolio. What changed was the way the client thinks about his wealth.
A substantial part of his capital used to be tied to one company and one business story. Today his wealth is spread across different sources of return, different horizons and different types of risk. He also knows why he owns each part of the portfolio and what he expects from it.
When markets wobble, he does not have to work out at that moment how large a decline his portfolio can take. We dealt with that question while the strategy was being built. He also knows which part of the capital stays available for the next business opportunity and which part is there to work over the long term.
The sale closed one chapter of his business life. For his wealth, a new one began.
If you are considering selling your company
You can start preparing the investment strategy before the transaction closes. Even at that stage you can think about the future structure of your wealth, the liquidity you will need, the investment horizon and the risk. The tax and legal set-up of the sale itself is best handled in good time with the relevant specialists.
Once the money arrives, it makes sense to get a view of your wealth as a whole first. Individual investments are then chosen by the role they are meant to play in that structure.
And then there is the question of risk. A ten percent decline means one thing on a portfolio of one million and something else entirely when you are looking at a fall in value of several million crowns. That threshold is better known while markets are calm.
After selling a company, the question is no longer only where to invest the money. You need to know how your whole estate should work for the next ten, twenty or thirty years.
What to take from this if you are considering selling your company
- Start thinking about the future shape of your wealth before the transaction closes. The investment strategy can be prepared in advance, and the tax and legal questions raised in good time with the relevant specialists.
- Look at your wealth as a whole first. Only then choose individual investments according to the role they are meant to play in it.
- Divide the capital by purpose and horizon. Money you want available is handled one way, a long-term portfolio another, and the part set aside for future business opportunities another again.
- Judge new offers in the context of the whole strategy. A property, a bank product or private equity can each make sense on their own. What matters is what they add to what you already own.
- Count risk in crowns, not only in percentages. On wealth in the tens of millions, a ten percent decline is an amount worth being prepared for before it actually arrives.
