As Boomers Look to Retire, ESOPs Grow in Popularity; SCA Group's Eric Nelson Identifies Top Scenarios and Benefits of ESOPs
The Baby Boomer generation has been identified as one of the most entrepreneurial generations in the history of our country. There are more than 75 million Baby Boomers and it is estimated that about 7 million of them are privately held business owners and many of these do Not have an exit strategy in place. ESOPs might be the perfect option for some businesses.
Boca Raton, FL, December 05, 2012 --(PR.com)-- It’s no secret the baby boomer generation has been identified as one the most entrepreneurial generations in our country’s history. It’s also no secret that approximately 7.7 million baby boomers will want to retire and sell their business in the next ten years and many don’t have a strategic plan designed on how to get it accomplished.
Because the recession has greatly diminished business values over the past years, planning a successful and profitable exit strategy might require owners a bit more thought and exploration of options than in years past. One out the best solutions to consider for someone owning a decently profitable, cash flowing company might be an ESOP, short for Employee Stock Ownership Plan, which is a sale of all or part of a business owner’s stock to an ESOP for cash, corporate notes, or a combination of both.
“An ESOP is not right for every company,” said Eric Nelson, partner in the executive advisory firm, SCA Group. “But there is an endless list of businesses such as small manufacturers, dry cleaners, auto body repair shops, hair salons, convenience stores, landscaping services, and restaurants that could absolutely benefit from an ESOP by allowing owners to cash out and employees to reap the benefits of success.”
Nelson suggests with changing M & A landscape combined with the number of boomer business owners looking to retire, that more business owners are turning to ESOPS to create liquidity from their businesses and identifies the top scenarios that make sense for ESOPs and the benefits they provide to parties involved:
· The value of a company may be higher in an ESOP transaction than in a regular sale
· Sellers to an ESOP may defer taxation (possibly permanently) on any gain resulting from a sale
· ESOP allows sale of all or part of the company
· If sale of less than 100% then portion not sold may have a higher value in the future
· Sale can incorporate warrants to key employees (including owner) that may have additional future value
· Seller wants a “friendly sale”, to know who’s buying the company
· Sale in an ESOP prevents any last minute negotiations and tricky buyer maneuvers
· ESOP is an option where there are limited exit options from strategic or financial buyers
· Seller has a desire to gain liquidity, “lock-in” value and maximize returns in a gradual or “staged” sale of the company
· Sellers who want to retain operational control
· Owner can receive an annual income by re-investing pre-tax dollars
· A partner wants to retire but the other partners can’t buy him/her out, ESOP may facilitate
Furthermore, Jeffrey S. Kahn, a shareholder with the international law firm of Greenberg Traurig and co-chair of the firm’s ESOP Practice Group, agrees ESOPs can make economic and practical sense. He has seen a significant increase in ESOP activity over the last two years and believes the recently improved designs for ESOP transactions is going to make this a popular exit strategy for baby boomers in the coming years.
About The SCA Group, LLC
The SCA Group provides C-level services including strategic counseling, operations optimization, regulatory solutions, technology initiatives, restructuring, mergers and acquisitions planning and support, and interim management to South Florida organizations. SCA offers expertise and immediate action to help companies through complex and often unforeseen financial circumstances. Each Partner has over 25 years of executive management and advisory experience. For more information please visit http://www.thescagroup.com or call 561-210-4423.
Because the recession has greatly diminished business values over the past years, planning a successful and profitable exit strategy might require owners a bit more thought and exploration of options than in years past. One out the best solutions to consider for someone owning a decently profitable, cash flowing company might be an ESOP, short for Employee Stock Ownership Plan, which is a sale of all or part of a business owner’s stock to an ESOP for cash, corporate notes, or a combination of both.
“An ESOP is not right for every company,” said Eric Nelson, partner in the executive advisory firm, SCA Group. “But there is an endless list of businesses such as small manufacturers, dry cleaners, auto body repair shops, hair salons, convenience stores, landscaping services, and restaurants that could absolutely benefit from an ESOP by allowing owners to cash out and employees to reap the benefits of success.”
Nelson suggests with changing M & A landscape combined with the number of boomer business owners looking to retire, that more business owners are turning to ESOPS to create liquidity from their businesses and identifies the top scenarios that make sense for ESOPs and the benefits they provide to parties involved:
· The value of a company may be higher in an ESOP transaction than in a regular sale
· Sellers to an ESOP may defer taxation (possibly permanently) on any gain resulting from a sale
· ESOP allows sale of all or part of the company
· If sale of less than 100% then portion not sold may have a higher value in the future
· Sale can incorporate warrants to key employees (including owner) that may have additional future value
· Seller wants a “friendly sale”, to know who’s buying the company
· Sale in an ESOP prevents any last minute negotiations and tricky buyer maneuvers
· ESOP is an option where there are limited exit options from strategic or financial buyers
· Seller has a desire to gain liquidity, “lock-in” value and maximize returns in a gradual or “staged” sale of the company
· Sellers who want to retain operational control
· Owner can receive an annual income by re-investing pre-tax dollars
· A partner wants to retire but the other partners can’t buy him/her out, ESOP may facilitate
Furthermore, Jeffrey S. Kahn, a shareholder with the international law firm of Greenberg Traurig and co-chair of the firm’s ESOP Practice Group, agrees ESOPs can make economic and practical sense. He has seen a significant increase in ESOP activity over the last two years and believes the recently improved designs for ESOP transactions is going to make this a popular exit strategy for baby boomers in the coming years.
About The SCA Group, LLC
The SCA Group provides C-level services including strategic counseling, operations optimization, regulatory solutions, technology initiatives, restructuring, mergers and acquisitions planning and support, and interim management to South Florida organizations. SCA offers expertise and immediate action to help companies through complex and often unforeseen financial circumstances. Each Partner has over 25 years of executive management and advisory experience. For more information please visit http://www.thescagroup.com or call 561-210-4423.
Contact
The SCA Group
Amy Grossman
215-493-1045
www.thescagroup.com/
Amy Grossman
215-493-1045
www.thescagroup.com/
Contact
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