When evaluating your options for exiting or achieving liquidity from your business, you’ll be faced with many different options. Although the most common method of selling a privately held business is a sale to an unrelated third party, business owners often seek to keep the business in the family or sell to management. However, not all family members have the desire or ability to take over the business, and management may not have the means to purchase the business.
An Employee Stock Ownership Plan, or ESOP, is an alternative approach that is gaining widespread appeal.
An ESOP involves a sale of the business to a retirement trust that ultimately benefits the company’s employees. A sale to an ESOP has the ability to provide economic value to the owner and to provide significant additional benefits that would otherwise not be realized in a sale to a third party:
- Legacy: The company name (family name) is less likely to change in a sale to an ESOP
- Community: The business is much more likely to remain locally owned and benefit the community in a sale to an ESOP
- Reward: A sale to an ESOP provides very large benefits to the company’s loyal employees
- Job Retention: ESOP-owned companies are much less likely to participate in layoffs, even during recessions, than their peers
- Flexibility: ESOP transactions permit the owner to sell all or part of the business and, if desired, remain involved in the business following the sale to an ESOP
- Tax-Efficiency: There are a variety of tax benefits that can make an ESOP transaction economically valuable to the former owner, the company and the employees
- Cash Flow: ESOP-owned companies tend to produce more free cash flows and default less than their peers
SES ESOP Strategies and its affiliates provide a complete range of financial and consulting services to companies considering an ESOP and to established ESOPs. As the preeminent provider of services throughout the ESOP life cycle, we take a uniquely strategic and responsible approach that maximizes value for owners, their companies and their employees. With guidance from SES ESOP Strategies, an ESOP can support an ownership transition that delivers sustainable benefits to all stakeholders.
With a multidisciplinary approach that integrates legal, finance, investment, banking, tax and ERISA expertise, SES ESOP Strategies delivers a full range of ESOP services.
- We help companies determine whether and how to establish and finance new ESOPs.
- We help companies manage follow-on transactions and evaluate and address mature ESOP issues.