Transportation companies are thriving today. But the industry’s most coveted asset, its drivers, are being heavily courted in a competitive employment environment. For a majority of transportation companies, driver satisfaction goes hand in hand with company reputation, customer satisfaction and success. The American Trucking Associations (“ATA”) reports that the transportation industry has struggled with driver shortages over the past 15 years. The shortage further exacerbates profit margin as the recent tight labor market has given rise to increased wages for drivers.
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.
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.
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.
As privately held businesses mature and grow in value, the desire for, and prudence of, personal liquidity and diversification grows in importance to business owners. When much of one’s personal net worth is tied to a highly successful, yet illiquid business, the owners are often faced with the question “how can I personally diversify yet remain in control of my company”?
Join PCE for NCEO’s two-day ESOP Symposium specifically designed to address issues facing established ESOPs. The ESOP Symposium is a gathering of the countries leading ESOP experts providing the most up to date information about ESOPs. Presentations will cover best practices related to governance, financing, operations, repurchase obligation, and culture. You will also have an opportunity to network with other ESOP companies. Additional details, agenda and registration information can be viewed here.
Daily, the sale or merger of a company involved in a service industry grabs the headlines. Whether a service provider to the healthcare, insurance or other industry, it feels like all companies and industries are in “play”. The announcements of these sales or mergers are normally accompanied with assurances from management that the ownership change will not adversely affect employees or the level of service to customers.
An Employee Stock Ownership Plan (ESOP) is a company sponsored, employee benefit plan that is analogous to a profit sharing plan. For privately held business owners, ESOPs can be a liquidity strategy that offers numerous benefits to the owner, business and its employees. These plans are usually leveraged (using debt to acquire the stock), and the capital borrowed can be different than debt incurred in normal course of business.
Implementing an Employee Stock Ownership Plan (ESOP) as part of a diversification or exit strategy for business owners fell out of favor in recent years as the credit crisis reduced liquidity options. All evidence, including recent transaction activity, indicates liquidity has returned to the ESOP market. This development, coupled with several research studies completed by various academic and non-profit research institutes, makes the sale to an ESOP a compelling strategy for today’s business owners who want to participate in the future growth of their business while diversifying personal assets.
While recently attending the Employee-Owned S Corporation of America (ESCA) Federal Policy Conference in Washington DC, I was struck by the fact that both Democrat and Republican congressional leaders who spoke at the conference were in support of current legislation that expands the idea of broad based employee ownership in privately held companies.
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