Q&A Webinar:  ESOP Misconceptions

By CSG Staff

There's a lot of confusion about employee stock ownership plans. Questions about structure, valuation, financing, governance, and exit planning are commonplace among owners and advisors. CSG's Lawrence Kaplan helped dispel a number of misconceptions in a recent, wide-ranging Q&A.

Kaplan fielded questions from middle market business leaders, attorneys, accountants, and wealth advisors in hour-long session, hosted by Vistage Networks. The most widely-applicable questions and answers are highlighted below. The session, in its entirety, is available at the bottom of this page.

Our friends at Vistage have graciously made this content available to all.

Selected ESOP Questions

ESOP Basics & Benefits (Q&A Webinar)
How do ESOP valuation multiples compare to other transactions? (Q&A Webinar)
What are typical ESOP financing terms? (Q&A Webinar)
Do employee owners have access to their company’s financial statements? (Q&A Webinar)
Who makes decisions in a 100% employee owned company? (Q&A Webinar)
What is a 1042 rollover? (Q&A Webinar)
 

All Questions Answered (in order)

Core Principles

  • What is an ESOP, and what are the benefits?
  • What is the recommended minimum company size for an ESOP?
  • What is the potential impact of Covid-19 on ESOP companies?
  • What are the potential downsides of an ESOP?
  • Who can be an ESOP trustee or shareholder?
  • Are audited financial statements necessary for an ESOP transaction?

Corporate Structures

  • Can any type of corporation become an ESOP?
  • How can an ESOP be structured?
  • How can an equity partner fit in to an ESOP transaction?
  • Can certain corporate structures be used to maximize ESOP benefits?
  • How long does an ESOP transaction take to complete?
  • What are the tax benefits associated with an ESOP?

Valuations

  • How are ESOP valuations determined?
  • How do ESOP valuation multiples compare to other transactions?
  • Do ESOP valuations differ between C and S corps?
  • How has Covid-19 impacted ESOP valuations?
  • Why are ESOP valuations based on C corp structures?
  • Is there a valuation discount in a partial ESOP sale?

Financing

  • What are the debt implications of a leveraged ESOP transaction?
  • Can ESOPs be financed without personal guarantees?
  • What are typical ESOP financing terms?
  • Can a company add too much debt with an ESOP?

Governance

  • Who makes decisions in a 100% employee owned company?
  • Can selling shareholders serve as trustees?
  • How are ESOP shares distributed?
  • Do employee owners have access to their company’s financial statements?
  • Can selling shareholders pay themselves the same salary after an ESOP transaction, and/or can they participate in the ESOP?
  • Can an ESOP trustee sell shares to an outside party?
  • How are owner distributions made in a minority, C corp ESOP?

Exit & Succession Planning

  • Can an ESOP be used to buy out shareholders (including retiring shareholders)?
  • What is a 1042 rollover?
  • How can succession planning fit into an ESOP sale?

Additional Questions

  • What is an ESOP termination or buyback?
  • How do ESOP companies manage repurchase obligations?

Full Video

Q&A Webinar - ESOP Misconceptions (Full Length; Vistage Aug 2020)