Seeking a better succession strategy

Today, Simon and Louise run 3000 Romney breeding ewes, 100 Angus cows and raise dairy grazers. The place is as beautiful as the name Ross na Clonagh sounds, but the road to ownership of the farm has been far from smooth.

Walker went to Canterbury University where he gained a BCom, majoring in marketing.

Once out of university he worked for two exporting companies before deciding to take on the family farm at the age of 30. "In retrospect it was too late," he says.

He spent many years trying to sort out a deal with his family and while he won't talk about the details, it's clear this process caused much grief and left him wondering whether it was all worth it after giving up "a damn good job" in town. It wasn't until his father died 10 years ago that the rest of the family were finally forced to talk turkey.

"All this took place during 20 years of the most difficult economic times in the history of farming in New Zealand. We had to front up with a lot of money which added an almost impossible debt to the farm."

Armed with this hindsight, he's already starting the process of negotiating with his offspring to buy Ross na Clonagh.

"Hamish, who's 23, is stock manager on the farm; Matt, 22, is working on a nearby dairy farm. Both are living at home after doing time at Lincoln and are keen to have a role in the farm in the future. So is our daughter Alice, 25, who's a financial analyst working in Auckland, but I believe she could also add value to the farm. They are all keen to talk about how we might resolve succession."

There have been no 'formal talks' as such yet, but when the family are together they talk about it informally.

Meanwhile, Walker has talked to many others about succession planning and says from what he's seen and read, there are no magic formulas.

"While I may not have all the answers yet, I believe my experience has taught me what not to do," he stresses.

Talking often, openly and honestly about the process is best, he says. He's aiming to be fair but concedes this almost certainly means the outcome will not be equal in dollar terms.

"The best system I've seen so far, where there is limited financial investment or resources outside the farm business, is where the siblings have debt to the parents which secures the property and also secures a 'needs-based' income for the parents, rather than market value rental or interest payments.

"All parties, most especially the aging parents, need to 'give a bit' to facilitate what has been decided as a combined family wish to avoid the sale of the farm."

The idea is the next generation buys the farm from the parents for a family friendly price and picks up any debt to the bank plus a debt to the parents. The debt to the bank has to be funded out of farm income. The debt to the parents generates and justifies their income from the farm, and allows them some security over the property.

"In the end the debt owed to the parents is shared so when they die the person farming the property gets a proportion gifted to them and may only have to pay the other two their proportions based on the price of the farm at the time the deal was done or market value, whichever is the lesser – not the value of the property when the last parent dies."

Such a value is a total disincentive and means the person running the farm is always worried the work they have done and the value they have added to the property and business will, effectively, have to be paid for twice.

Walker says he's talked to his sons and suggested to them that if they can work together on the farm it will be more successful financially. He also accepts it is desirable for the family to buy more land to make Ross na Clonagh more viable as more and more people expect something from the business.

He's a believer in the old adage that the ideal time for a person to take on the farm cheque book is 24, and one of his sons is getting close to that age now. The desire to have a fifth generation run the farm is strong.

"It's not my right to do this.... I'm essentially a caretaker."

And he has no intention of just selling up and going to sit on a beach to live off the cash he might make. He wants to give his children a chance to run the attractive property and to do it with less stress than he had to endure.