Last month the Wall Street Journal published a series of articles on ESOPs. The Art of the Sale is another Wall Street Journal article that mentions ESOPs as one of four common ways to sell a company:

• Outright Sale – The article describes this as the simplest method to cash out. This is desirable when the owner's family has no interest in the business, if they are not prepared for the challenges of the business, or if the owner wants to maximize the purchase price (most generally a synergistic buyer). It discusses how stock sales generally benefit the seller and how asset sales benefit the buyer (liability remains with the seller).
  
  [This option is also the de facto default method and generally the only one that can be implemented without proper planning: No One Plans to Fail, But Fails to Plan]
  
  
• Management Buyout – The article notes how the sale price may be smaller due to lending concerns, and notes that it is hard to predict the company's performance under the new owners.
  
  
• Employee Stock Plan – The article discusses employee stock ownership plans (ESOPs) as another alternative, mentioning the reward to employees and the tax benefits as advantages. It discusses the third party valuation bringing a lower price (without mentioning the importance of comparing the after-tax price to properly consider the tax benefits of selling to an ESOP) and the future repurchase obligation as drawbacks.
  
  
• Recapitalization – The article suggests changing the company's capital structure to gradually sell their stake while maintaining control of the company. [Although the article did not mention it, an ESOP can also accomplish this.
  
  We recently discussed an example: In the News: Gradually Selling to an ESOP over Time].

This article provides a good overview of some of the business transition options. It is also a reminder of the benefits of succession planning.