€300k cash but company worth €3m

Hi,

I wanted to get an opinion on my finances.

I have about 120k in a private pension in ETFs
I own about 3m worth of shares in my company. Company doing well but relatively hard to get to make liquid.
I sold my house and have around 300k lump. I am going to rent for a couple of years until I sell the company above.

Just wondering what to do with the lump sum. I have it in a fixed term deposit getting poor interest. I was thinking of investing it but that would add to a lot of exposure to the stock market? Effectively pension + investment + lump would be all in shares.

Am I doing the right thing in having it in fixed savings?

Don't leave it all in the one bank. Your savings are only guaranteed up to €100,000 per bank, so split it across multiple banks in the unlikely event one goes tits up.

You could always stick it into 10 year Post Office Certs. They'll pay you €48,000.00 tax free when mature. As you've plenty more money coming down the line, you might not need to access the €300k. Not sure how much you're allowed as an individual to invest, but it's €240,000.00 for a couple. If you've a child you could invest the left over amount for them

Why are you waiting to sell your company? What will happen if the value of your company falls between now and the time you want to sell it?

How much do you think you need for a new house? If you intend to buy in a few years, you should just keep it in cash as a stock market crash could have a detrimental effect on your ability to sell your company for the price you want as well as the fall in the value of your savings.

I would look into what needs to be done to move the sale of your company forward.


Steven
www.bluewaterfp.ie

noproblem said:

You could always stick it into 10 year Post Office Certs. They'll pay you €48,000.00 tax free when mature. As you've plenty more money coming down the line, you might not need to access the €300k. Not sure how much you're allowed as an individual to invest, but it's €240,000.00 for a couple. If you've a child you could invest the left over amount for them

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It's €120,000 for an individual.

I think people are mad to invest in the 10 year certs. The return works out at 1.5% per annum IF you keep the money invested for 10 years. It is likely that interest rates will be a good bit higher than that by year 10. If you cash in early, you get really hammered. If you only got half way through the term, you get an annualised return of 0.296%. 10 years is far too long an investment period at such low returns. Take some investment risk to get better returns or just accept that rates are low for everyone.


Steven
www.bluewaterfp.ie

Savings certs would pay 5% over 5 years still very low return but an AER of 0.98% is much greater than the 0.296 achievable by holding 10 year bond for five years at which time interest rates might have improved and the certs could be rolled over

Thanks for the general advice.

SBarrett said:

Why are you waiting to sell your company? What will happen if the value of your company falls between now and the time you want to sell it?

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In relation to selling the company, I am not the only one involved and we want to wait until turnover hits a certain mark. Will be a couple of years.

Hi arry

Are you getting a substantial income from the company? Has it €3m worth of real assets like property or is most of the valuation in the goodwill of the company?

The reason I ask is that a turn down in business and the company could lose most or all of its value. As it's your own company, there isn't much you can do about it other than to sell it.

Is it all or nothing? If, for example, it's a company with property assets, can you sell the property and make a distribution?

As the €300k is only 10% of your total wealth, I am not sure how best to invest it. You should not lock it away in any fund you can't access without penalty. You might have a clear plan in your head at the moment, but things rarely go according to plan. In two years, you might not want to or you might not be able to sell your company, but you might want to buy a house so you need access to the cash.

I hate timing the market, but the stockmarket looks a fair bit overvalued now. Given that the value of you company will probably be affected by the same factors which might cause the stockmarket to crash, a boring low yield deposit account is probably the best bet.

But why not buy a home for yourself? That is the best long-term investment because of the tax treatment.

Brendan

arry said:

In relation to selling the company, I am not the only one involved and we want to wait until turnover hits a certain mark. Will be a couple of years.

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Why?

Have you worked out if selling the business at €3m will provide you and your partner(s) enough income for the rest of your life? Or do you need the higher company valuation so you each have enough money? Have you also worked out if turnover decreases due to a recession, what will the effect be?

It can take a number of years to sell a business, especially one valued in the millions, so make sure you plan everything well in advance.


Steven
www.bluewaterfp.ie

SBarrett said:

It can take a number of years to sell a business, especially one valued in the millions, so make sure you plan everything well in advance.

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That is a very good point. You should be talking to accountants who specialise in the area now so that they can begin a plan for the sell-off.

It might also be possible to sell 20% of the company now and bank some of your money as an insurance against things going wrong.

Brendan

Hi arry, though not directly related to your original post- if you anticipate selling the company in the next number of years rather than focus on the €300k I would instead prioritise having everything in order to facilitate getting funds out of the company in a tax efficient manner when the sale goes through.
These include, retirement relief, termination payments and pension tax free amounts etc. If done properly the benefits should dwarf the potential return on the €300k, which you can instead keep as a safety net. Just a thought ...