Howard L. Lewis had been preparing himself and his business to become part of another organization for years. In 2012, a deal got done and Family Heritage Life Insurancewas acquired by Torchmark Corp.Lewis has remained with the business and now serves as chairman emeritus. The transition to a new position in the company you built is not always so seamless, however.
“Your goal or objective as the seller may be that you want to remain and continue,” Lewis says. “However, if that’s not consistent with what new ownership wants, then you have a breach or a problem.”
Lewis started his business in 1989 and has built it into one of the industry’s leading providers of supplemental health and life insurance products. The transition away from leading day-to-day operations has afforded him time to pursue other passions.
We spoke with Lewis about his approach to selling the company, the critical importance of tax planning and the opportunity that exists after you sell your business. What follows is a transcript of the above video, edited for readability.
Find a strategic fit
We always knew from go that at some point, we would be merged or acquired because that’s just in the insurance industry, that’s what happens. Most people don’t recognize immediately the name Family Heritage. But everyone knows AFLAC — the duck. We’re the No. 2 company in that market. We knew from the outset there would come a point where somebody would really want us or we would really want to be part of something much more significant. And in 2011 or so, it began to be apparent that maybe this was the time to look at the market conditions and see if there were buyers for this kind of a business. Now, at our size, there needed to be a strategic buyer and we needed to see how we would fit into that business that was going to acquire us. All those things successfully happened.
Utilize consultant expertise
It starts with finding the right national consultant. So we interviewed lots and lots of national organizations. And with anything, there were things about organizations that we liked and there were things that we didn’t like. But we settled on a large international firm in New York City, very competent, very professional and thoroughly involved in the insurance industry at all levels. They led us through a very successful acquisition.
Tax planning is crucial
Take this word to heart: tax. Make certain that the proceeds of the sale of your business are going to be maintained and preserved by smart tax planning. All of that should be in place about how the capital is going to pass through, about how the stock shares are going to pass through. The taxes are a major, major hit and unfortunately, there are people who pay excessive taxes. Taxes are a reality, but you want to minimize the tax you have to pay. With smart advisers and consultants, they can lead you through what is a very difficult process and make the transaction optimally effective for you and your heirs and your family on a go-forward basis.
We had excellent guidance. I had been involved with some other people and it’s clear not everyone thinks about that. It’s clear that consultants working with people don’t always think to ask. They presume that you have the tax side of this in place and in order. Trusts set up and heirs and what you’re going to do with the proceeds. Once the sale is consummated, you face the reality of the taxes.
Let the seller beware
Be sure that the desire of the seller is acceptable to the new ownership. Their attitude may be that they want to go with their own management. They may decide they want to appoint somebody in the company. Your goal or objective as the seller may be that you want to remain and continue. However, if that’s not consistent with what new ownership wants, then you have a breach or a problem. That all has to be worked through and understood during the negotiating process of the transaction.
A golden opportunity
This is a golden time if you are a founder or an owner. You have a lot of options about your continuing involvement and responsibility with the business. But to a greater extent, you now have the financial wherewithal and you have the time to be able to work on the charities and within the community, the things that you want to do. I have the privilege to serve on seven boards. I have the privilege to raise capital for both my undergraduate school, the University of Kentucky, and my graduate school. I have an MBA from Xavier University in Cincinnati.
And to work on things in our community like the centennial campaign for the Cleveland Clinic. You see my Food Bank pin, I’m on the board of (Greater) Cleveland Food Bank and Harvest for Hunger campaign. There are so many worthy things in our community that really impact the lives of people. You have an opportunity to be part of that. In terms of your own personal legacy of being able to give, you now have the financial resources to do that. But you also have the time and you’ve got the skill set and the background to be able to contribute to the leadership of local organizations that are involved in services to the community.