You’ve heard about Employee Stock Ownership Plans (ESOPs) and know they offer a succession strategy for your company that provides you with liquidity and gives your employees a foundation for the future. What’s the next step for exploring this option?
“An ESOP trustee is going to fire me!”
“An ESOP trustee will vote me off the board!”
“An ESOP trustee is planning to take over my company!"
Dramatic misconceptions of ESOP trustees and their role are common during the process of structuring an employee stock ownership plan (ESOP). The truth is, it takes an experienced group of professionals to close an ESOP transaction the right way, and an ESOP trustee is a vital member of that team. Choosing a qualified ESOP trustee must begin with trust, and trust begins with understanding. With that in mind, please review the information below to learn more about ESOP trustees—and about why (and how) your company should choose wisely.
While ESOP companies are often better able to withstand economic recessions, they have the same exposure to financial crises that any other company has, and may have added complexities when dealing with specific circumstances. Whether you are a newly formed ESOP or a mature ESOP will determine what additional topics to address.
The COVID-19 pandemic has gifted most business owners and their employees with an unfortunate shared experience: worry over the state of their personal finances, and concern about threats to the very survival of the company they either own or owe their livelihood to. This, plus anxiety about personal health, can consume one’s time and have a paralyzing impact on day-to-day activities.
A market like today’s requires flexibility to continue to be successful. Flexibility to work remotely, to fit in homeschooling for your children, to stay fit while the gym is closed, and countless other ways we have all adapted over the past two months. This flexibility will also need to include flexibility with how M&A deals will get closed in this market. For business owners interested in a flexible M&A deal, selling all or part of their business to an Employee Stock Ownership Plan (ESOP) might be the best option. We expect ESOP sales will be the first type of M&A transaction to come back after the pandemic-driven slowdown eases, in large part due to the flexibility they offer.
Flexibility is the star attribute of a well-designed ESOP (employee stock ownership plan). Your ability to establish what percentage of the company you sell to the ESOP is just one reason ESOPs are so appealing. Whether you are currently exploring an ESOP as a succession strategy or your company is partially owned by an ESOP, understanding how to determine the optimal ownership level is key to achieving your individual and company goals. This article will examine how to choose between a partial and a 100% ESOP, how to decided when and if to increase the ESOPs ownership stake in the company, as well as several issues the company and its shareholders must consider for immediate and long-term ESOP success.
The M&A market is defined by many types of buyers, but consolidators have been the most publicized. Beyond the public markets and headlines, similar behavior is taking place among privately held companies.
Employee Stock Ownership Plans (ESOPs) provide significant benefits to business owners, and as a result, the ESOP liquidity strategy has become increasingly popular. This strategy, however, is not without complications, so you must understand the ESOP transaction and implementation processes before you decide to implement an ESOP at your company.
Determining when and how to exit your business is one of the most important and personal decisions you will make throughout your career. An Employee Stock Ownership Plan (ESOP) is a particularly attractive vehicle, given the flexibility it provides. An ESOP offers a tailored approach to selling your business. Selling to an ESOP offers meaningful liquidity while providing significant benefits to the company’s employees and delivering a powerful corporate finance tool that provides tremendous tax savings to both the owners and the company.
On their face Employee Stock Ownership Plans (ESOPs) appear to be a vehicle for employee ownership and not something that invites Private Equity Group (PEG) investment due to differing ownership structures. On the contrary, ESOPs and PEGs can co-exist in a mutually beneficial relationship. In many cases, PEGs view ESOP companies as having the exact characteristics they look for in target investments.
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