CSG in the News - Summer 2022

With M&A activity returning to pre-pandemic levels, and talent retention persisting as a top-of-mind concern for many private and family-owned businesses, national publications and podcasts sought the insights of CSG's advisors. Read ahead for their thought leadership on leveraged ESOPs as construction industry exit alternatives, employee benefit differentiators, and more employee ownership-related insights.

Construction Executive Features Patrick Fallon

Taking Stock

Architecture, engineering and construction firms are looking to the future by actively assessing their staffing needs, as well as their ability to attract and retain top talent. But that’s not the only consideration they’re facing. In the first nine months of 2021, according to PwC’s “2022 Engineering and Construction Deals Outlook,” deal volume eclipsed pre-pandemic levels by 14%. The prospects for continued industry growth, coupled with favorable credit-market financing, should continue to fuel M&A activity in the months ahead.

If you’re wondering if this is a good time to sell your construction firm, you need to examine all your options carefully. Private-equity and third-party transactions aren’t always smooth sailing, as potential acquirers attempt to re-trade deals during the arduous and drawn-out process; in fact, more deals fail than close. Meanwhile, certain alternatives are overlooked altogether—such as employee stock ownership plans (ESOP).

An ESOP is essentially two things: an employee benefit plan and a self-directed buy-out of your own company. The plan offers employees stock in their company, which they earn over time. Shareholders either contribute or sell equity to a trust that represents those employees. In doing so, owners can unlock some or all of their net worth that’s locked in the business. That means liquidity—with significant tax breaks—for themselves and their families.

The complete article is available on Construction Executive.

Authority Magazine Interviews Lawrence Kaplan

The Labor Shortage and 5 Ways to Attract & Retain Great Talent

Authority:  Based on your opinion and experience, what do you think were the main pain points that caused the great resignation?  Why is so much of the workforce unhappy?

Kaplan:  I still believe in the power of forging in-person connections. Virtual work can have a detrimental effect on workplace culture. Without emotional or added financial incentives, employees don’t have a lot of added motivation to stick around.

One of the reasons ESOPs were created was to offer employees skin in the game. Working for a paycheck alone isn’t a huge motivator, especially when the market is so hot. When employees gain an equity stake in their company, they earn a tangible, wealth-building incentive. The longer they stay, the more shares they receive. But they also become part of something greater than themselves:  an employee-centric workplace culture. ESOPs help align owners and their employees so that everyone is rolling in the same direction, with the same end goals in mind.

Authority:  It has been said that “people don’t quit jobs, they quit bosses.”  How do you think this has been true during the Great Resignation?

Kaplan:  That’s an interesting question for an ESOP guy. We work with clients that share equity with the majority of their employees, essentially making them all part-owners. Pride-of-ownership can off-set potential downsides of traditional workplace hierarchies. Employees feel like they belong, regardless their direct supervisor.

Because of this, employees are motivated and willing to build positive work environments, which further promote workplace stability and desirability. This allows employees to look inward and take a problem-solving approach, if needed, rather than just walking out of the door and finding a new company if a problem were to arise.

Kaplan's full interview is available on Authority Magazine.

How2Exit Podcast Interviews Larry Kaplan

The Hidden Powers of ESOPs in M&A

How2Exit:  If someone could only remember three things from our conversation, what would those things be?

Kaplan:  Number one, if you’re an entrepreneur and you’re thinking of an exit strategy, more likely than not, your professional advisors have very limited information about what an ESOP is. But if you're considering employee ownership, research it and reach out to an ESOP advisor that really knows what they’re talking about. They'll dispel massive amounts of misinformation. 

Number two, there's financing available. Lenders lend to ESOP companies the same way that they lend private equity companies.

And number three, when you're an 100% ESOP-owned company, rather than paying taxes you're building-up equity value for your employees. It's a great way of paying back the employees that have helped you build your company. And at the same time, you're going to get paid fair market value for your stock. It's a win-win situation on all fronts.

Kaplan's full interview is available on How2Exit.