Does anyone have experience buying an ESOP owned company?

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April 19, 2022

by a searcher from DePaul University in Oklahoma City, OK, USA

I am looking into a company that is majority owned by family members with a minority stake owned by an ESOP (Employee Stock Ownership Plan). I am wondering what complexities this may add, if any, to an acquisition. Any insight would be appreciated.

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Reply by a searcher
from Texas A&M University in Johnson City, TN, USA
I have looked at and bid on these. If EBITDA lesss than $1m, it causes SBA complications for most buyers, so your competition should be theoretically lower and you should try to negotiate good terms and price to compensate for the head ache.

In my cases, I've always sought to keep as many employee owners as possible, and leaving them woth "walk away" cash is an issue that must be dealt with through vesting, etc.

The point of ESOP that I've seen is to tie down employees long term and typically a "retirement" plan. Both good goals and reason to continue. I would not implement ESOP if not already in place. Better ways to accomplish same goals.
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Reply by a searcher
from Harvard University in Fort Wayne, IN, USA
I’m certain there are many folks more knowledgeable on here, but I seriously looked at one during my search and ended up walking away. This might be just the deal I looked at but here were my concerns - managing a very complex set of stakeholders (lawyers who want to keep the money train running, business managers who don’t want supervision, marketers who fear losing the “employee-owned” tagline, and employees who can be swung by all of those named above), chasing a moving price tag (so many stakeholders want to play negotiator), and the legal hurdles add significant time and cost to the purchase process.
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