Over the years, employee stock ownership plans (ESOP) have evolved in many ways. Currently, ESOP transactions began to resemble traditional M&A transactions including financial structures, warrants and market rate sub-debt. In a recent presentation at the NCEO Employee Ownership Conference, Allison Wilkerson discusses current marketplace trends in structuring ESOP transactions, including the importance of pre-transaction structure analysis and post-transaction planning. Allison also goes over the beneficial tax planning opportunities associated with ESOP transactions.

See presentation slides here.

ESOPs have long provided an exit strategy for owners of privately held businesses and a platform for management buyouts.  Mergers and acquisition (M&A) advisors increasingly look to leveraged ESOPs to accomplish both conventional stock and asset acquisitions.

Once an ESOP company decides to pursue an acquisition opportunity, it will generally structure in one of three ways.  As more fully described in the following article, the acquiring company will (1) buy the stock or the assets of the target division or company; (2) merge with the target; or (3) have the target create a new ESOP, sell the target to the newly created ESOP, and then merge the ESOP that purchased the target with the acquiring company’s existing ESOP.

Read the full article.