With all the family wealth in a business, and no successor to come to the fore, it sometimes means that the business just has to be sold. The question remains: to whom should you sell it? If you can answer that question, then even more important questions follow. Can you trust the buyer to preserve your great efforts, the livelihoods of your employees, and the business itself? As many have discovered over the years, there is much to be said for selling the business to the employees themselves in the form of an ESOP or “Employee Stock Ownership Plan.”
Much has been written on the topics of employee ownership and the ESOP transition before, but a recent Forbes article titled “The Better Exit Strategy: ESOPs Satisfy Business Owners And Preserve Their Legacy” is worth your read.
When there must be an exit from the business, whether a full exit from the business or simply a way to pull out much needed capital, the exit strategy means weighing the available options. To sell the business to a larger company may mean gutting the business to only those elements the buyer wants to keep. Likewise, venture capital means distilling the business to a profit-center to be used and sold for profit.
What if you have an established business with established and trustworthy employees – employees that might make good owners? Consider an ESOP. In fact, the ESOP allows the owners to sell and the employees to buy in a tidy package that helps everyone. Moreover, it preserves the business, and the legacy of the founders. The owners can even stay on as employees themselves and continue at the helm, if the deal is structured accordingly.
Indeed, an ESOP is not a strategy suited to everyone and every business. There are some cases where it went terribly wrong. Nevertheless, ESOPs are quite an intriguing and powerful option for a closely held business. Take a look at the original article and others like it to learn more.
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Reference: Forbes (February 12, 2014) “The Better Exit Strategy: ESOPs Satisfy Business Owners And Preserve Their Legacy”