Company being Sold - Financial Thoughts

[footballman]

have been with the same company for almost 30 years and found out that it is being sold to a competitor. I am in my early 50's, so I cannot do early retirement. Finances are in good shape with emergency fund of about 6 months. At this point, no one knows who will survive but I am a top performer and may be kept but need to plan for the worst.

My questions are:

1. I have a 15 year loan on my house with $1811 payment of P&I. I refinanced 5 years ago, so there is 10 years left. I could increase the length of loan to 15 or 20 and reduce my payment by 500 or 700. Current rate is 4%, new rates are 3 3/4%. Is it wise to look at lenghtening loan?

2. I assume what I qualify for in my pension now is mine. I ran the pension calculator and I could receive a sizeable lump sump and then can receive single life annuity beginning at 55. I believe waiting until 62 would be better as that would maximize payout. If I do get a cash payment now, can I roll that into a rollover IRA with my 401k?

3. On medical, based on my years of service, I would pay 35% of medical but with buyout, I am not sure if this is a benefit I would get at 55? Document say if you are involutary separated 50-54, you would get this at 55 but not sure this applies for company being sold.

I have looked at all expenses and cut where I can. Is there anything else I should be thinkng about with a sale of company?

Thanks,

Mike

 

[pb4uski]

First and foremost, while having your company sold is unnerving and creates uncertainty, in many cases it can be a good thing.

I would not refinance to lengthen the loan given the difference in interest rates is so slight.

You should be vested in your pension. If you chose a lump sum, you can roll the proceeds into an IRA and you can roll it over into the same IRA that you roll your 401k into if you wish.

Typically if a company is sold it is the stock so the sale by itself should not change your benefits package. However, the new owner may change the benefits... in many cases they will try to conform the benefits of the acquired company to the acquirer's benefit package which may be better or worse than what you have now.

 

[soupcxan]

I am in my early 50's, so I cannot do early retirement.

Why do you rule this out? Have you looked at your expenses versus your projected income?

 

[footballman]

First and foremost, while having your company sold is unnerving and creates uncertainty, in many cases it can be a good thing.

I would not refinance to lengthen the loan given the difference in interest rates is so slight.

You should be vested in your pension. If you chose a lump sum, you can roll the proceeds into an IRA and you can roll it over into the same IRA that you roll your 401k into if you wish.

Typically if a company is sold it is the stock so the sale by itself should not change your benefits package. However, the new owner may change the benefits... in many cases they will try to conform the benefits of the acquired company to the acquirer's benefit package which may be better or worse than what you have now.

My thought on the mortgage was not to save due to the interest rate but to reduce my payment by 500 to 700 per month. This is no cost but of course does increase the term.

 

[footballman]

Why do you rule this out? Have you looked at your expenses versus your projected income?

Young kids, still have to pay for primary school and then college. I wish I could but probably need 8-10 more years. Thanks.

 

[soupcxan]

Young kids, still have to pay for primary school and then college. I wish I could but probably need 8-10 more years. Thanks.

In that case I agree that you should hope for the best but plan for the worst. Acquisitions can be highly unpredictable for the acquired employees.

 

[latexman]

I'm 58. I've been in the chemical industry for 36 years, in the same business unit for 27 years, and have been sold and bought twice (2001 and 2010). IMO, don't sweat it! If the new company wants you, you'll do fine. If they don't, my experience is, they will give a generous package. Then, you can use those $ to find another job. They will probably make some resources available to you in your job hunt.

 

[Texas Proud]

If you can get a no cost refi and extend out to 15 years... I would do that in a heartbeat... and I mean really no cost... not one where the cost are rolled up into your new loan... zip, nada, nothing...

First, you get a lower interest rate for free...

Second, you CAN pay less per month if you wish...

But, if you do not have any changes to your work situation, you can still pay what you are paying now and have about 10 years left... will be less since a lower rate, but not by much...


I will ask... is it a done deal Or is it just an announcement... some purchases do not get approved and the deal drops...

 

[footballman]

If you can get a no cost refi and extend out to 15 years... I would do that in a heartbeat... and I mean really no cost... not one where the cost are rolled up into your new loan... zip, nada, nothing...

First, you get a lower interest rate for free...

Second, you CAN pay less per month if you wish...

But, if you do not have any changes to your work situation, you can still pay what you are paying now and have about 10 years left... will be less since a lower rate, but not by much...


I will ask... is it a done deal Or is it just an announcement... some purchases do not get approved and the deal drops...

Announced, but I want to prepare if it does go through. Thanks.

 

[walkinwood]

Start reaching out to colleagues at other companies (and other departments in your co.) and look for opportunities. You never know - there may be something out there that is better than what you have even if you don't get laid off. I wouldn't change departments in the company at this time unless you're on a layoff list.

 

[Running_Man]

#1) To do so now would be wise to improve your cash flow and allow you to build emergency cash. Most buyouts done today are done to look for places to reduce expenses and while you might be safe, you need to have as good a handle on your expenses as possible

#2) The pension is yours, I assume you are eligible for either a lump sum or an annuity, the lump sum is primarily effected by your age, the benefit and interest rates. As interest rates are as low as they have ever been lump sums are higher than they have been for the most part, it could be rolled over to an IRA.

#3) Medical expense promises made by corporations are not worth anything since the courts ruled they can be changed on a whim at any time. Do not count on that but be grateful for any benefit you do get in the future.


I have been involved in buyouts and in discussions on terminations of employees and analyzing plans to close plants, the acquiring company will not be honest on their plans because they do not want people to leave before they want them to/ and or have had a chance to evaluate the personnel to see who to keep. You can only control though what you control and worrying about what the acquiring company will only drive you crazy. Save as much as you can without driving the family insane. Good luck.

 

[Texas Proud]

And just to add to what Running Man said....

Just because you are good at what you do does not mean you will survive... I have been through a number of these and I have seen whole depts let go, from both companies....

IOW, if they think the acquiring company's accounting group is the best, the acquired companies might be let go... they also might be in a different city and not be willing to pay for your move even if they want you...

Same for all depts... the last one I went through they seemed to try and pick depts from both companies and the winner won and the loser lost... very few from the losing group were able to stay on...

I was able to stay on for a few years, but then another power struggle where some high up put her select pick in charge even though they did not know anything about the work... she got rid of a good number of good people and then moved on...

 

[rayinpenn]

I am in the financial services industry and have survived 3 mergers 30+ years in the same firm. A very smart man once said to me I don't worry about what I can't control. I add the following but I do everything in my power to be prepared to deal with adversity.
Calmly without undue stress...
1. Refinance having a lower payment option can add to the six months emergency fund
2. Cease all discretionary spending - at lease until the game plan becomes clear. No $4 cups of mocha Java.
3. Brown bag your life
4. No other debt right?
5. Age and type of vehicles?
6. Mow you own lawn?

Is the spouse working? Could she work? Like I said no panic but do take some prudent steps.





Sent from my iPad using Early Retirement Forum.

 

[footballman]

I am in the financial services industry and have survived 3 mergers 30+ years in the same firm. A very smart man once said to me I don't worry about what I can't control. I add the following but I do everything in my power to be prepared to deal with adversity.
Calmly without undue stress...
1. Refinance having a lower payment option can add to the six months emergency fund
2. Cease all discretionary spending - at lease until the game plan becomes clear. No $4 cups of mocha Java.
3. Brown bag your life
4. No other debt right?
5. Age and type of vehicles?
6. Mow you own lawn?

Is the spouse working? Could she work? Like I said no panic but do take some prudent steps.





Sent from my iPad using Early Retirement Forum.

I agree with you on the control piece.

1. That is what I am thinking and will likely pull the trigger.
2. Already started that.
3. Started that too.
4. Second home and car loan.
5. 2012 Minivan and 2014 SUV. Loan on SUV at 1.9%. One other thought is that should I roll this into new home loan or keep separate?
6. Always mow my own lawn.

Great advice from everyone, I apreciate it.

 

[frayne]

I am in the financial services industry and have survived 3 mergers 30+ years in the same firm. A very smart man once said to me I don't worry about what I can't control. I add the following but I do everything in my power to be prepared to deal with adversity.
Calmly without undue stress...
1. Refinance having a lower payment option can add to the six months emergency fund
2. Cease all discretionary spending - at lease until the game plan becomes clear. No $4 cups of mocha Java.
3. Brown bag your life
4. No other debt right?
5. Age and type of vehicles?
6. Mow you own lawn?

Is the spouse working? Could she work? Like I said no panic but do take some prudent steps.





Sent from my iPad using Early Retirement Forum.

Great advice. Been there and done that and no regrets whatsoever. Actually have been through three events when the company was sold and I came out better each time, usually a promotion and a raise. All that said, it still makes good sense to live within or below your means. I agree with the comment about not worrying about what you can't control but that is so much easier said than done, especially when you have a wife and children depending on you.

 

[ivinsfan]

If you don't already, I would track every penny that you are spending.

You have 2 very new cars and apparently pay for your children to attend a private school. Permanent car and tuition payments will quickly drain anyone's bank account.
This is one challenge with having children at an older age, when you should really be putting away money for a secure retirement, the children's expense's are at the highest level. Your kids will need vehicles, car insurance, maybe wedding money...I'd start projecting some of these expenses now while you still have time to change course.

 

[ivinsfan]

If you don't already, I would track every penny that you are spending.

You have 2 very new cars and apparently pay for your children to attend a private school. Permanent car and tuition payments will quickly drain anyone's bank account.
This is one challenge with having children at an older age, when you should really be putting away money for a secure retirement, the children's expense's are at the highest level. Your kids will need vehicles, car insurance, maybe wedding money...I'd start projecting some of these expenses now while you still have time to change course.

Also just noticed you have a second home.....does this mean you have 2 house payments?

 

[rodi]

I feel your pain. My employer split into 3 in '97, then my third was acquired by a MUCH larger company in 2000, a major piece was spun off in the mid 2000's, then the remainder was split in half in 2009, later my half was acquired by a household name, but they ran us as a separate company, then my piece of the company was sold off to a very small company in 2013.
A lot of new letterhead. A lot of new paycheck issuers. But my desk and work never changed. My immediate management never changed... my product line stayed in the same industry (new products over the years, new customers... but same niche.)

All that led to stress... but I was never laid off. That said - I saw a lot of friends laid off - especially those in corporate functions (HR, payroll, finance, PR, legal, etc.). Those are the areas that tend to have overlap and duplication when two companies merge.

I would not refinance for the reason that you would be extending your term of mortgage into your retirement years. That means you need a bigger income stream in retirement to cover the mortgage. But there are long and heated threads on this forum about whether it's better to pay off a mortgage or not.... so my opinion is just that - my opinion.

I agree with some of the other suggestions to be prepared - don't make any extra purchases, keep track of your expenses and look at what you can cut back on.... little cuts can add up and make your 6 month emergency fund last longer. I assume if you lost your job due to this acquisition you'd qualify for unemployment insurance - which will also stretch your emergency fund. And... if you get laid off - hit the ground running on looking for a new job.

I wish you all the best in this. I know how stressful it can be.

 

[athena53]

I would not refinance for the reason that you would be extending your term of mortgage into your retirement years.

Not necessarily. DH and I took out a 15-year mortgage when I was 50. We refinanced when I was 57, also for 15 years. I started a "sinking fund", putting the difference between the old and new payments into a mutual fund every month, intending to still have it paid off at 65. I ended up retiring at 61, and decided then to start paying only the P&I (no more sinking fund). The OP could do the reverse: refinance, make the new. lower payments, but if things look more secure, invest the savings.

OP, good luck; I also survived a merger and did well. They brought in consultants who tried to use a balanced approach in determining who got let go, and I think there were more job losses in my area in the acquiring company than in my company. I agree with the recommendations that you see what's out there (and I found that recruiters tend to zoom in quickly) but some who left my company actually came back a few years later!

 

[Brat]

Start reaching out to colleagues at other companies (and other departments in your co.) and look for opportunities. You never know - there may be something out there that is better than what you have even if you don't get laid off. I wouldn't change departments in the company at this time unless you're on a layoff list.

This is sound advice. You are in a much better position to find a job when you have a job.

Sit down with your wife and share with her your concerns. Do you really need the 'other house'? If you lose your job would she agree to sell that house if you didn't find another in say 4 months? A new job may mean a move, she needs to know that it may be financially necessary.

After you and your wife have a plan consider sharing the elements that impact the children with them. For example if you usually took a ski vacation to Vale change their expectations.

 

[karen1972]

Having been through 3 mergers and about 100 rounds of layoffs, I can say, try to find another job..if nothing else to prove to yourself you can get another job.. While I survived these layoffs, that's what it is ... surviving. It turned into zero career growth and lots of untrust among co-workers as they all jockeyed for position in the new structure. I even survived all of those people, had a retention bonus, but it wasn't the same company, they didn't share the same values, and there was zero chance I would have chosen that job. I just think this is always a good time to look, if nothing else to have a comparison of what is out there and what you may be missing out on.

 

[footballman]

Great feedback from everyone, I do appreciate it.

I did pull the trigger on the refinance. A new 15 year loan at 3 5/8 that will save about 500 per month. Also, called Cable and Satellite and saved some more money.

I am working on renting the second home, already done for January and February next year. Figure if I can do that, it will cover all my costs. I really would like to keep this as a retirement home.

All advice is greatly appreciated. Thanks.

 

[Texas Proud]

Having been through 3 mergers and about 100 rounds of layoffs, I can say, try to find another job..if nothing else to prove to yourself you can get another job.. While I survived these layoffs, that's what it is ... surviving. It turned into zero career growth and lots of untrust among co-workers as they all jockeyed for position in the new structure. I even survived all of those people, had a retention bonus, but it wasn't the same company, they didn't share the same values, and there was zero chance I would have chosen that job. I just think this is always a good time to look, if nothing else to have a comparison of what is out there and what you may be missing out on.

LOL... you just reminded me of one guy I met during a meeting on which system, group of people etc. etc. would go forward in the merger... someone on our side said that this was the third time this guy had been 'merged' with/into the firm...

IOW, he worked for the firm and during one merger was let go... got a big severance package since he was high up.... went to another firm and two years later it was bought by company that let him go... since he was a former employee his time at mega carried over and he got another big severance package.... he got another job and yes, it was bought by mega and he got his third big severance package....

 

[Big_Hitter]

good luck with the merger - been through a few myself (since Reagan)

 

[pb4uski]

LOL... you just reminded me of one guy I met during a meeting on which system, group of people etc. etc. would go forward in the merger... someone on our side said that this was the third time this guy had been 'merged' with/into the firm.......

We had a guy that left Mega to go with a smaller firm.... ~12 months later Mega acquired the smaller firm.