18th July 2024

Agribusiness – Succession Planning

Agribusiness - Succession Planning

By Richard Miller

Agribusiness – Succession planning…

“So, what’s the plan?” I find myself posing this question to agricultural clients on an increasingly regular basis. This a huge step forward from years gone by when discussing the future was a subject to be avoided or at least, put off for another day.

When I consider why discussions surrounding succession are now more frequently on clients’ minds, there are some key factors as to why the landscape has changed:

  • The bank

There is no more effective way of motivating clients to deal with a challenging subject than if money is at stake. When lending to the agri sector, most banks will now insist that a succession plan is in place, for example, a 25 year loan facility where the youngest partner in the business will turn 65 during this term; some lenders are stipulating that a succession plan is drawn up and put into effect as a condition of the loan offer.

  • Bad press

Bad news travels fast… so when the press started publicising court cases where families were at war over disputed Wills and “Promissory Estoppel” claims (Spencer v Spencer [2023] EWHC 2050), it’s no surprise that a read of Farmers Weekly may have caused a few sleepless nights. Broken promises are now actionable legal cases with clear precedents for others to follow.

  • The next generation

Gone are the days when the only motivation a young person working on the farm needed was the quiet reassurance that “one day, this will all be yours”. In a generation that focusses more on the here and now, it is no surprise that younger members of farming families are asking the succession question much earlier than their parents did (if they ever dared to raise it!).

Given that succession questions are now being asked more frequently, what are the answers being given? I can break these down into three main categories:

“I don’t know”

Fear of the unknown weighs down on the minds of the best of us. Add in a high pressure and volatile industry and you can really start to see how uncertainty surrounding the future of a business would have a negative impact on someone’s wellbeing. Not knowing what the plan for the future is can often be a good thing; it allows you to start from a blank canvass. With the right professional support from your trusted advisers, you can explore the options and make an informed decision from there.

“Well, Peter is going to get the farm and Paul is going to get a house paid for”  

The difficulty with knowing what you want for the future is that most clients have come to this conclusion without appreciating the wider implications. It is not uncommon for clients to write their Wills leaving legacies for non-farming children, which are simply not viable and the end result being that the farm would have to be sold after their day. When presented with this net impact, clients often state that this is the last thing they want!

“I’ll bring Peter into the business when he’s ready”

Define ready? What do you mean by bring him in? What assets are in the business? Leave it too long and Peter will have gone to work somewhere else. Do it too early and without proper advice and Peter’s divorce settlement will devastate the business.

There is no doubt that succession planning is increasingly at the forefront of clients’ minds. Early input from your professional advisers remains key if you are going to look after the best interests of all those involved. If you have questions then we’ll be happy to help – just get in touch.