Structuring M&A and Private Equity Sales Involving Employee Stock Ownership Plans
Evaluating Advantages and Risks, Best Practices for Structuring the Deal
Employee stock ownership plans (ESOPs) provide an alternative strategy for selling a business. ESOPs allow company owners to achieve various degrees of liquidity for their ownership rights sold in an employee stock ownership trust (ESOT) transaction—while simultaneously rewarding a broad-based group of employees who will continue to help build the business.
When structuring an ESOT transaction, counsel should consider the advantages and risks of using leveraged ESOPs as an alternative for transitioning ownership. Counsel also must understand the mechanics of structuring a leveraged ESOT transaction as ESOPs are highly regulated and many technical tax and ERISA fiduciary issues need to be addressed to ensure an ESOT transaction that satisfies regulatory, statutory, and case law compliance mandates.
David R. Johanson, senior partner at Hawkins Parnell Thackston & Young LLP, will examine the growing use of leveraged ESOPs in structuring acquisitions, divestitures and private equity sales and purchases. His panel will discuss the advantages and challenges of selling all or part of a business to an ESOT and best practices for structuring the transaction.
The presentation will review these and other key issues:
- What are the latest trends in the use of ESOPs in structuring acquisitions, divestitures and private equity sales and purchases?
- What are the tax and other benefits of using leveraged ESOPs in structuring transactions? What are the downsides of the ESOP structure?
- Can ESOT debt be subordinated to bank debt where seller financing is part of a transaction? If so, how?
- What are the mechanics of structuring a leveraged ESOT transaction?