What's an ESOP?

Employee Ownership:  An M&A Alternative

America's closely-held businesses create prosperity and bolster communities. But even the most enduring companies eventually reach an M&A crossroads, often with a range of options. Third-party sales and private equity deals create liquidity, but these transactions can eliminate jobs, diminish legacies, and yield hefty tax burdens.

What if you could monetize your equity, and maintain a meaningful role with your company, while securing the future of your business and its employees? It's possible with an employee stock ownership plan. ESOPs enable privately-held companies to sell equity, at an independent valuation, to an employee trust.

These are not stock option plans. Instead, an ESOP is an ERISA-authorized retirement plan that invests directly in employer securities.


Learn How ESOPs Work
Cash

TAX-ADVANTAGED LIQUIDITY

Shareholders can defer or eliminate capital gains taxes on their sale proceeds, while their companies gain meaningful tax deductions and can become income tax-free entities, in perpetuity.

ESOP Tax Advantages In-Depth

Crossing Arrows

FLEXIBILITY & DIVERSIFICATION

Partial ESOP sales are common, as are follow-up transactions. That allows shareholders to de-risk with potential upside and enables companies to engage in future ESOP or M&A transactions.

HOW ESOPs UNLOCK NET WORTH

People

ENGAGED EMPLOYEE-OWNERS

Full-time staff earn stock over time, giving them skin in the game and stability. Research has shown that employee-owned companies outperform their non-ESOP peers.

WHY EMPLOYEE OWNERSHIP MATTERS

Employee Ownership Benefits, Pros & Cons 


Leveraged ESOP strategies carry notable advantages compared to private equity and third-party transactions. Transactions are customizable, industry agnostic, and can be utilized by partnerships, as well as C and S corporations.

But it's important to understand the full range of costs, benefits, corporate implications, common use cases.

If you own or advise a private company, and you're considering a transaction, it's also wise to compare employee ownership plans against other M&A options.

For a comprehensive overview, download our reference guide.

 

More ESOP Questions? We Can Help.


 When CSG Partners was founded in 2000, we made education a priority. That remains central to everything we do. So, if you have questions about forming an ESOP, executing a transaction, or operating an employee-owned company, you've come to the right place. Book time with our team today.