Selling Your Business to an ESOP
Company owners who are interested in liquidating their business but aren't sure where to turn ought to consider the potential virtues of an ESOP. This is an option for selling off their business that they might not have previously considered. However, the virtues of doing so are difficult to deny. This is why we want to take an in-depth look at the immense value that can come with making this choice while liquidating a business.
What is an Employee Stock Ownership Plan (ESOP)?
Employees can potentially be among the best possible owners for a company going forward. This is because they already work within the business day-to-day and understand the underlying business operations as they are performed. Plus, employees can take a greater sense of pride in their work when they understand that they are taking some ownership of that work.
Benefits of Selling to an ESOP
Company owners who are interested in selling their business might ask themselves why they wouldn't simply go out and try to find a third-party buyer to purchase their stake. As it happens, this might not be the best possible option. Rather, there are numerous benefits to selling to an ESOP, including:
Maintaining the Company Culture: There is a lot to be said for preserving the company culture that was created by the founders. When they sell to existing employees, they have better control over what that culture will look like.
Control Over How Much to Sell: It is not necessarily the case that one must sell off their entire company all at once. Instead, with an ESOP plan, it is possible to sell off only the portion that makes sense to an owner at the given time.
Employee Retention: Employees will feel a greater sense of pride in their work when they are offered the opportunity to participate in the ownership of the company they work for. Therefore, a higher level of employee retention is certainly possible when selling to an ESOP.
You can take these benefits to the bank, and they are worthy of consideration when reviewing the potential plans to sell.
How Does an ESOP Transaction Work?
To make an ESOP transaction work, the company will need to create new shares that it then sells to employees interested in participating. The employees are buying an ownership stake in the company when they do so. At the same time, the company can then raise capital to service its debt and take care of anything else that it needs to. Funding those future operations means that the company can continue to improve its profitability, and that is great news for all employees who participate in the ESOP, as their shares will become more valuable over time.
Contact Purpose Equity if You Want to Learn More About Selling Your Business to an ESOP
You can make a lot of progress regarding selling your business when you consider going the ESOP route. We know that this might be a different approach than you might have attempted to use in the past, but we also believe that you might end up selecting this as your ideal choice for selling your business. With that in mind, we ask that you contact us at Purpose Equity to help.
At Purpose Equity, we have worked on a huge number of ESOP deals for our clients before, and we understand that doing so helps them reach the results that they are aiming for and helps them create a brighter future for the company.
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