It's important to have the right team
The primary purpose of an ESOP (Employee Stock Ownership Plan) is to – wait for it – own the stock of the sponsoring employer.
But how does the stock actually end up in the trust? Do the previous owners/founders just give it away? Of course not.
Getting the shares into the ESOP trust presents a bit of a dilemma: the selling shareholders want the highest price they can get for their shares, while the ESOP Trust wants to pay the lowest price they can to acquire the same shares.
How do we break this logjam? And who structures the deal and does all the negotiating?
The selling shareholders will likely be represented by their corporate or financial advisors, and the Trust will be represented by the Trustee. This is us.
Our job is to negotiate on behalf of the Trust and pay no more than fair market value for the company shares, both in price and other deal terms.
We handle the due diligence, negotiations, pre-closing, closing, and post-closing activities on behalf of the trust. We are an independent, 3rd -party, not-emotionally-attached party to the transaction. Our job is to remain calm, cool, and collected on behalf of the Trust during what may be the biggest transaction of the selling shareholder’s life.
Likewise, what happens later on down-the-road when an ESOP-owned company receives an offer from another company to buy out the ESOP shares and cash out all the Trust participants? What should the Trust do? Do we take their proposed offer? Is it fair? What happens to the Trust participants? Who handles the due diligence, negotiations, pre-closing, closing, and post-closing activities on behalf of the Trust?
Again, this is us.
We’ve been down this road many, many times. Both on the buy side and the sell side. Our job is a smooth, equitable ESOP transaction in the best interest of the Trust participants.