Congress has chosen to bestow a variety of significant tax benefits on business owners and companies that participate in a special ownership structure. Because it is very difficult for a fully taxable ownership structure to compete with a tax-advantaged structure, many business owners should evaluate the possibilities under this special structure, known commonly as an Employee Stock Ownership Plan (ESOP). The ESOP structure provides shareholder and corporate tax benefits which require proper consideration and transaction structuring to ensure maximum benefit.
Business owners thinking about transitioning out of their companies must consider factors that help identify and target buyers of choice. Certainly, active acquirers that consistently demonstrate an ability to pay handsome prices, close deals rapidly and continuously create shareholder value via acquisitions is a winning combination.
Are you a business owner considering a partial or total ESOP (Employee Stock Ownership Plan)? If so, you are likely to find that the Tax Cuts and Jobs Act of 2017 will produce greater benefits for you and your company’s stakeholders than before the law was passed.
Research consistently shows that the additional cost of an investment banker is a fraction of the value they add.
Late last year Congress passed the final version of the Tax Cuts and Jobs Act of 2017. Although the plan does not alter ESOP legislation, there are some indirect effects on ESOPs. Some of the changes will impact the valuations of ESOP-owned companies.
Among the fastest ways for a company to grow entity value is through accretive acquisitions. With a well-executed acquisition strategy, companies can realize significant value in the first year, which often accelerates in the years that follow.
Lennar Corporation recently announced the acquisition of CalAtlantic Group. Together, the companies form the largest home builder in the U.S.