Key Facts About Exit Planning and ESOPs

Some quick facts courtesy of the Exit Planning Institute

A strategic way for private and family-owned companies to implement succession and sale strategies is through utilizing Employee Stock Ownership Plans (ESOPs). With this method, the unique goals of the owners and company serve to focus our approach, as we assess, structure, and implement transactions for our clients.

Critical to the ESOP opportunity is its flexibility. Sellers can control the means and timing of their exits, rather than cede control to others. In many transactions, owner-managers continue to lead the company, growing value and performance until they retire.

My company, SES Advisors, brings more than 25 years of ESOP experience to the table, often brought to a client by their current advisors. Together, we solve client problems and deliver extraordinary value. SES is headquartered just outside Philadelphia, and has offices nationwide.

Over 50 percent of the owners of privately held businesses say they expect to have a change in ownership within the next 15 years. (MassMutual American Family Business Survey, 2003, Grant Thornton Business Owner Survey, 2005)
Business owners are expected to generate $10 trillion in personal liquidity over the next 15 years through business sales. (VIP Forum, 2005)
Forty-three percent of business owners have no formal financial plan. (TNS Global, Phoenix Wealth Survey, 2005, PriceWaterhouse, 2006)
Sixty-four percent of business owners have no plan to minimize capital gains and estate taxes. (TNS Global, Phoenix Wealth Survey, 2005, PriceWaterhouse, 2006)
More than 50 percent of all family businesses do not have a written strategic plan. (Marquette University’s Center for Family Business Survey of Family Business Issues, 2003)
More than 50 percent of regional family businesses do not have a buy/sell agreement. (Marquette University’s Center for Family Business Survey of Family Business Issues, 2003)
Nearly one third (31.4%) of CEOs have no estate plan beyond a will. (Mass Mutual, Kennesaw State University, Family Firm Institute American Family Business Survey, 2007)

Are ESOPs Really More Complex Than Other Ways to Sell a Business?

This table from the NCEO* compares the complexity, risks and flexibility of selling a closely held company to an ESOP compared to selling to a third party. It is based on the advice of a number of experts in the field. Each transaction, however, will bring its own special issues, so the descriptions in this table are for typical transactions and may not apply to every situation.