A $65 Million Family Business. Two Owners. One Seriously Underfunded Buy/Sell Agreement.
The agreement said exactly what should happen if either owner died. What it didn't answer was where the $30+ million of liquidity would come from without putting pressure on the business itself.
A growing business. A static funding strategy.
Marcus and Elena Voss had built Meridian Partners, a regional commercial real estate services firm, over twenty-two years. Each owned approximately 50% of the business, which had grown to roughly $65 million in enterprise value — with each partner's interest representing approximately $32.5 million.
Both were actively involved in management. Both wanted the business to remain within the family. And both had done the right thing years earlier: they had a formal buy/sell agreement in place, clearly specifying what would happen if either owner died.
The problem was that the business had grown substantially since the agreement was funded. The existing life insurance was a fraction of what would be required to execute the agreement at current valuations. The legal document was complete. The capital behind it was not.
A buy/sell agreement is only as strong as the liquidity behind it.
The legal agreement clearly stated what would happen at death. The surviving owner — or the business — would acquire the deceased owner's interest. The attorneys had done their work.
But the insurance funding had not kept pace with the company's growth. The business had increased dramatically in value while the existing death benefits had remained relatively static. As a result, there was a substantial funding gap between what the agreement required and what was actually available.
The agreement created an obligation. It did not create the cash to satisfy it.
The agreement created an obligation. It did not create the cash to satisfy it.
Monolith changed the funding question.
Instead of asking how much premium the company could afford every year, Monolith began with a different question: how much liquidity does the family actually need — and how can that liquidity be engineered without permanently burdening the operating company? The attorneys still determined the appropriate agreement. The valuation professionals determined business value. The CPA advised on tax consequences. The Family Office coordinated the broader family strategy. Monolith addressed the funding gap.
Quantify the true buy/sell obligation
Determine the current value of each owner's interest and model how the obligation may increase as the business continues growing. The strategy should consider what the business might be worth five, ten, or fifteen years from now — not just today's valuation.
Identify the liquidity gap
Compare the projected obligation with existing life insurance, available liquid assets, debt capacity, and other funding sources. An agreement funded for today's value may become materially underfunded as enterprise value increases.
Engineer dedicated permanent liquidity
Design significant permanent life insurance specifically around the succession obligation. The objective is to create sufficient liquidity so the death of an owner does not force the business to sell assets, borrow excessively, or disrupt operations.
Allow the strategy to mature
Properly designed permanent policies accumulate cash value over time. As the policy matures, cash value growth can become an increasingly important component of the overall economics — potentially reducing the strategy's dependence on continued external premium support over time, subject to actual policy performance.
The buy/sell agreement finally had liquidity behind it — without making the business the permanent funding source.
The family did not need another legal agreement. They needed the capital to make the existing agreement work.
The revised strategy established substantial dedicated liquidity around both owners. The business retained greater flexibility to deploy cash toward operations and growth. Over time, the permanent policy values were designed to become an increasingly meaningful part of the strategy's economics.
If either owner died, the surviving family and business would have access to a dedicated source of capital designed specifically to complete the ownership transition.
Allow the business to fund growth while the liquidity strategy matured alongside it.
The Dilemma
Fully funding the agreement created another problem.
The obvious solution was to purchase substantially more life insurance. But obtaining the required permanent death benefits for two successful business owners in their fifties could require significant annual premium commitments — potentially hundreds of thousands of dollars annually, or more, depending on age, health, carrier, product, and funding assumptions.
Those premium dollars would otherwise be available for hiring, expansion, acquisitions, debt reduction, technology, employee compensation, distributions, and working capital.
Every dollar committed to funding the buy/sell agreement reduced current operating cash flow. That created an uncomfortable tradeoff: protect tomorrow's succession plan — or invest in today's business growth.
Key insight
Protecting the business shouldn't require starving the business.
The Risk
What happens if one owner dies while the agreement remains underfunded.
If either Marcus or Elena died unexpectedly with the buy/sell materially underfunded, the consequences could include:
- The surviving owner must borrow significant capital
- The company assumes substantial new leverage
- Outside capital or investors may be required
- Business assets may need to be sold
- Distributions may be suspended
- The deceased owner's family may receive payments over many years
- Valuation disputes may emerge
- The surviving owner may ultimately lose control
- The intended succession plan may fail
The real risk
The greatest risk wasn't the owner's death. It was what the lack of liquidity could force the family to do afterward.
The Long-Term View
From annual expense to a growing balance-sheet asset.
Early years
The Monolith approach raises the capital to fully fund the insurance required for the buy/sell. The owners of the business will have no personal capital outlay or expenses.
Accumulation years
Cash value begins compounding inside the permanent insurance structure.
Maturing strategy
Growing policy value can provide increasing financial flexibility and potentially reduce the strategy's dependence on ongoing pledged collateral.
Liquidity event
At death, the permanence of the policy death benefit provides the capital needed to execute the buy/sell agreement or is left to the heirs.
The goal is not perpetual dependence on operating cash. The goal is to build an asset designed to increasingly support the liquidity strategy itself.
*Policy values, premiums, funding requirements, and death benefits depend on carrier, product, underwriting, funding design, interest-crediting assumptions, charges, and actual policy performance.
Family Office Relevance
The Family Office's role isn't just planning the transition. It's making sure the transition can actually be funded.
Family Offices routinely coordinate attorneys, accountants, valuation specialists, investment managers, and business advisors around closely held family enterprises. Yet one issue can remain hidden until the moment the plan is tested: liquidity.
Monolith provides another tool for addressing that gap. The Family Office remains at the center of the relationship while Monolith works alongside the family's existing professionals to evaluate and engineer the liquidity component.
Key insight
Better documents do not solve an underfunded succession plan. Capital does.
Evaluate Your Situation
Is the buy/sell agreement funded for what the business is worth today — or what it was worth years ago?
Bring us a closely held business where ownership value has outgrown the existing insurance or other succession funding. We can help quantify the current and projected liquidity gap and determine whether Monolith may provide a more efficient way to support the family's ownership transition.
Designed to complement the family's existing legal, tax, valuation, insurance, and Family Office advisors.
This case study is a composite narrative. Names, industry, and identifying details have been changed to protect client confidentiality. The financial structures and outcomes are representative of actual engagements. Past results do not guarantee future outcomes. The Clearview Group does not provide legal or tax advice. All strategies are implemented in coordination with qualified legal and tax counsel. Policy values, premiums, funding requirements, and death benefits depend on carrier, product, underwriting, funding design, interest-crediting assumptions, charges, and actual policy performance. Results are not guaranteed.