Rich and Co.

Good News from the Closely-Held Business Front – ESOPs: Doing Well While Doing Good.

Companies that Have Created an ESOP are Doing Well
We sent a day this week at the Illinois ESOP Association learning about his effective tool for ownership transition, employee ownership and creating wealth and business continuity.

ESOPs are a well kept secret.  The idea is straightforward – an owner can transfer ownership of a company to the employees smoothly, quickly and profitably.  But you need a team of experienced experts to do it and oversee the process.

The meeting was both professionals who serve ESOPs and representative or companies and employees who are already ESOP companies.   In addition, one of the local Congressmen’s very competent staff people.  We talked to a printing machine operator and a shop floor worker at a

The news is good.  Companies that have done ESOPs are, generally, thriving.  An ESOP seems to:

  • Settle the uncertainties of ownership successionBuild and enhance new channels of communications in the company
  • Moblize all of the expert intellectual capital inside of a company.  

ESOPs Take a Team of Experienced Professionals
Because of the significant benefits the government allows for ESOPs they are complex and regulated entities.  Fortunately, Chicago is the epicenter of ESOP professionals in the country.  The attorneys, accounts, benefits professionals, valuation firms, banks and other supporting firms have created a core of expert advisors and counselors. 

Business owners, their advisors and employees can get ready access to a full team of seasoned and expert professional support.

ESOP as a Vehicle for Ownership Succession, Transition and Creating Liquidity
Business transitions are likely to jump significantly as the Baby Boomer generation of closely-held business owners seek to provide for the continuity of their businesses, legacies and provide for their retirements and families.

It is estimated there will be at least twice as many business sales and transitions in the future as Baby Boomer owners retire.

While the percentage of business-owners that chose to undertake and ESOP is a minority there are factors that make them more appealing:

  • Difficulties in direct sales and low multiples
  • More service-oriented businesses need to assure continuity of employees and intellectual capital they containLenders are more experienced and therefore favorable to ESOP lending
  • Increasing evidence that employee-owned enterprise are more competitive and profitable
  • Because of the success of 401(k) plans, employees are more knowledgeable and engaged in their own long-term retirement and financial planning.

Contact us, if you would like more information.


Written by Rich and Co.

March 12, 2011 at 10:32 am

Posted in Uncategorized

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