SA DAIRYJOHN MULVANY

MARCH 2015

SUCCEEDING WITH TRANSITION

We have got to get this lot in rhythm!

We need to get something very, very, very clear...

THEY ARE YOUR NET ASSETS

NO-ONE ELSE’S!

Diversity creates flexibility!

Debt can create rigidity!

HOW DO I KNOW THAT I HAVE GOT THE SKILLS? THE OLDS NEED TO BE CONFIDENT IN YOU!!!

• Good effective sussing out?

• Yap Yap” vs “Score on the board”

• Identifying gaps

Have a good look

in the mirror!

What about Succession

It’s like weaning calves – not an event but a process!

• Respect the asset owners

• Involve the active members, then all interested parties

• Develop a game plan then go to professionals

• Performance and low debt help!

WHAT DO THEY ALL HAVE IN COMMON?

Gradual skills development – “score on the board” (It fills the “olds” with some confidence)

Respect for the asset owners, mutual trust and empathy

Farm Performance – PROFIT

Supportive lenders

Patience, but “drive”!

THE STEPS...

Where are we now? (Description of current total business position)

What do the asset owners want, and when?

Who else is directly (daily/business) involved? (Active members) What do they want?

Who else is indirectly involved (Interested Parties)? What might they want?

Possible pathways to achieve those stated objectives

Action from here? Who’s the driver? Set dates

Document all of the above (draft and final), and agree on who else to involve.

Involve others, refine options, re-work document, final decisions.

STRUCTURES

Options

Partnership Share farming Leasing Purchase Trusts with CompaniesTransition can work in all of the above- but they are different and it’s important to understand the differences and always ask the question: If we stop tomorrow what do we own?

AND THEN THERE ARE “TRUSTS”

Either “unit” or “discretionary”

Discretionary Trust

Works well when a single family holds assets in trust for beneficiaries.

Infinite existence and beneficiaries can be adjusted

A concern is the grey area of who owns what when more than one family is involved.

“TRUSTS”

Unit Trust

Family members take ownership of “units” Assets of the trust make up the total unit value People coming in or going out can purchase units at current

market value Entity can lease land from family members owning land. Wage equivalent paid for effort All unit holders share in growth But...exert caution on transferring assets to this structure

Tailored combo possible and was what was recommended to the Shies!

Common features of successful succession...

Assets are purchased or protected

The operational business (cows and mobile plant, and possibly the land) is rented or a share arrangement exists.

At any point in time, all individuals must know what happens if disaster strikes tomorrow or someone wants out.

Farming and non-farming individuals need to be informed by the asset holders

Involvement of professionals who act quickly to achieve the stated outcomes of the asset holders.

Some great examples of the “leg-up”

Stock sold to young lessee at “mates rates”

Mum and Dad’s debt is taken over for 50% stock and chopper income for 6 years

Owners finance sharefarmer at Rabo rates plus 2% to purchase the herd

Land valuation concessional

Returning family member receives 2% of net assets per year to assist with ownership

In an uncertain, volatile industry one outcome is certain