Largest Transactions Closed
In this favorable market, how do sellers contemplating an exit from their business decide whether to pursue an M&A sell-side transaction or the formation of an Employee Stock Ownership Plan (ESOP)? They don’t. Instead, they run a dual track process which incorporates both processes. This provides the owners knowledge of both possible outcomes simultaneously. Now the owner can make the best choice based on actual offers and company specific options.
Each exit scenario provides benefits and challenges. The tables below show a quick summary of the pros and cons of each exit process.
PCE manages both processes simultaneously but under one engagement: a sell-side auction process and an ESOP process.
The auction element of a sell-side process and the ESOP fair market valuation can each be enhanced when conducted in a parallel exercise. The ESOP valuation considers bona fide offers from capable buyers, which a sell-side auction inherently produces. This ensures the ESOP valuation closely tracks strategic buyer offers. The preferential tax treatment for the ESOP scenario challenges the strategic buyers to increase their offers to match the higher ESOP after-tax proceeds. Therefore, the ESOP is actually part of the sell-side auction.
We believe an owner needs to fully understand all of their liquidity options, and the Dual Track engagement eliminates the chance of an uninformed decision.
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