For those considering ESOP succession planning, Kevin Long compares the cost of an ESOP with a conventional third-party sale, and how selling to an ESOP can actually cost much less.
As ESOP attorneys, we hear this question all the time. Aren’t ESOPs expensive? Aren’t they complicated?
Well, that’s actually the wrong question to ask. The right question to ask is this: How do the costs and details of an ESOP transaction compare to a transaction where you sell your company to a private equity group or a strategic buyer?
Because that’s essentially what’s happening with an ESOP.
You aren’t doing an ESOP. The ESOP is a buyer for all or part of your company. And in almost every circumstance, you’re going to find that the cost of an ESOP transaction can be much less than a third-party transaction.
In a third party transaction you’ll have at least two lawyers, accountants, investment bankers and brokers, and the extensive due diligence and negotiations they’ll be involved in.
In an ESOP transaction, you have a friendly buyer that knows your company.
Of course you’ll have lawyers, consultants, and an appraiser for the due diligence, transaction design, and perhaps financing. But you won’t have the cost of an investment banker or broker taking the company to market and taking a percentage of the transaction.
To figure out what you do need for your particular transition and what you don’t, we use a transparent pricing guide to ensure you’re spending only the right fees and costs in the right order.
That’s the way to efficiently and cost effectively complete an ESOP transaction.
Speaking of benefits, this is Kevin Long. If you need specific guidance on this topic, let’s start a conversation.
This podcast is for general informational purposes only. It does not create an attorney-client relationship between Employee Benefits Law Group and the listener or reader and does not constitute legal advice for a specific situation.
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