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.
As COVID-19 continues to upend any sense of routine, the phrase ‘business as usual’ no longer makes sense. Business owners and executives are being forced to adapt daily to a changing economic and health environment.
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.
In many businesses, ownership and management teams strive to define and implement a culture that differentiates their company from its competitors. Creating an Employee Stock Ownership Plan (“ESOP”) not only preserves but often enhances corporate culture. For years, we have seen companies use ESOPs and various other ownership-sharing tools to attract, retain, and motivate talented individuals. Compelling research continues to highlight that employee ownership can be a powerful tool that yields enhanced corporate performance especially when paired with an “ownership culture.”
Family-owned businesses, a key pillar in the American economy, make up a significant number of the privately held companies across our country. Although these companies cut across all industries and range in size from small to large, they all share common challenges. The most daunting of these challenges is how to manage the transition of the business from generation to generation.
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