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An ESOP Feasibility Study:

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A Key Step Toward Employee Ownership

Decisions about exit strategies and succession planning are among the most important any business owner can make. If you’re considering selling your closely held company to an employee stock ownership plan (ESOP), you’ll want to fully understand the implications of the decision on you, your company, and your employees.

When you undertake a feasibility study with ESOP Partners, you’ll not only learn whether or not an ESOP is a good fit for your business — you’ll also discover what to expect as you move forward.

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What is an ESOP Readiness Assessment?

The ESOP decision-making process starts with an initial, no-cost ESOP readiness assessment. In a free follow-up consultation, we’ll cover the following areas to determine whether you and your business may both benefit from the advantages of employee ownership:

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Shareholder goals and objectives

Shareholder goals and objectives
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Employee headcount

Employee headcount
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EBITDA (earnings before interest, taxes, depreciation, and amortization)

EBITDA (earnings before interest, taxes, depreciation, and amortization)
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Estimated ESOP transaction price (based on industry, EBITDA, and other factors)

Estimated ESOP transaction price (based on industry, EBITDA, and other factors)
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Management team’s readiness for an ESOP transition

Management team’s readiness for an ESOP transition

If your initial assessment determines that your company is a good ESOP candidate, a comprehensive ESOP feasibility study is your next step in the process. It’s needed to provide more insight into the key factors that influence your successful ESOP sale, and your company’s likelihood of thriving as an ESOP-owned business.

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After your comprehensive ESOP feasibility study, you can expect to know with greater certainty:
  • An estimation of an ESOP transaction price
  • Review of multiple options for structuring the business transaction to meet your financial goals and tax-efficiency objectives
  • After-tax cash flow analysis to the selling shareholder(s), to determine the liquidity expected from the sale
  • Financing options and considerations
  • Company cash flow analysis (before and after the ESOP sale)
  • An employee participation analysis to ensure regulatory compliance
  • Corporate structure recommendations (C corporation versus S corporation)
  • Measure and review reward structures for key executives and/or high-value employees
  • Expected employee retirement benefits from the plan
  • Ongoing administration requirements
  • Expected costs and timeline for the ESOP sale

Ultimately, the decision whether to sell your company to an ESOP and provide this unique employee benefit is yours alone.

ESOP Partners understands your need for complete clarity in one of the most influential decisions of your professional life. Our teams appreciate the lifelong investment that’s often involved in a closely held business, and we have extensive experience making the ESOP transition a confident step forward for business owners and employees alike.

Your ESOP feasibility study serves as a map and guidebook, providing all the data you need to make an informed business decision that supports your personal objectives, as well as the future growth of your business.

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