Thursday, 12 December 2013 15:28

ESOP Examples

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ESOP Builders Inc. - CASE FILE #10339

INDUSTRY: Commercial printer

SITUATION ANALYSIS: A family owned and operated business for over 40 years, with 125 employees, looking to sell the company.

OBJECTIVE: To sell the company as a going concern at a fair value, to provide liquidity to the family members.

SOLUTIONS: Sold 100% of the company to the employees. 5 key employees purchased 55%, 80% of the remaining employees purchased 45% of the Company. The owner took a vendor take-back for 7% of the purchase price. The employees purchased 10% and the bank loaned 20%.

IMPLEMENTATION TIMELINE: From the start of our involvement in setting up the ESOP to financial completion was a total of 4 months.

RESULT: Company cash flows increased 40% in the first year of acquisition allowing the company to pay out the family owner in 2 years instead of projected

7 years. By year 4, the company purchased the building it was leasing from the family owner at fair market value. The value of the company is now 3 times the purchase price. 

ESOP Builders Inc. - CASE FILE #9691

INDUSTRY: Software developer

SITUATION ANALYSIS: Servicing the financial services sector with approximately 80 employees.

OBJECTIVE: To attract and retain highly skilled employees in all facets of the company; engineering; programming; sales; and administration.

SOLUTIONS: Set up an ESOP including both an equity and stock option component; At the Feasibility research phase it was ascertained that a high percentage of the existing employees had a keen desire to participate. The ESOP Plan was designed to allow all employees to participate. Upon implementation, over 90% of employees participated.

IMPLEMENTATION TIMELINE: From the start of our involvement in setting up an ESOP to closing the ESOP was 6 months.

RESULT: Company was able to grow at 45% per annum for subsequent three years by attracting and retaining employees. Company was sold at 10 times its original value at ESOP inception. 

ESOP Builders Inc. - CASE FILE #10882

INDUSTRY: Financial services industry

SITUATION ANALYSIS: With about 300 employees, this company was serving many blue-chip corporate customers from operations in the UK and the USA. The four owners of this family owned business implemented the ESOP in two steps. The first step was integrating the key management and then they proceeded with broad based ownership.

OBJECTIVE: To attract and retain highly skilled employees including front line workers dealing directly with the public; to align corporate goals among the three operating divisions in different countries.

SOLUTIONS: Created a stock option and phantom plan, which converted to equity upon certain conditions. All eligible employees were included and had a take up rate of over 80%.

IMPLEMENTATION TIMELINE: From the start of our process in setting up the ESOP to completion was 5 months.

RESULT: Company consequently ranked number 1 in its industry; achieving growth of over 30% per annum. Expansion into the USA, through acquisition, increased number of employees by 200. 

Source: ESOP Builders Inc. (USA)

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