Texas Service Company Completes Partial ESOP Transaction

The principals of Pilot Hill Advisors, a national ESOP advisory firm, are pleased to announce that the owners of a TX service business have successfully completed a partial sale of stock the company’s newly-formed employee stock ownership plan.

The senior co-founder of this consumer service business was nearing retirement and needed to transition his management responsibilities and diversify his company stock in a tax efficient manner. 

He and his partner built the company into an industry leader based on exceptional customer care provided by dedicated employees. In thinking about the transition, the founders wanted to reward their employees hard work while making sure the company continued to thrive.  They were also committed to avoiding the risks they experienced as senior managers of other businesses that were sold to private equity and strategic buyers.

After careful consideration and planning the co-founders decided to sell a portion of company stock to their employees using an ESOP.  This partial sale allows the parent company and management team to achieve their goals, which include:

• Retaining a controlling interest in the company by the co-founders

• Creating a transaction that enabled the selling owner to generate liquidity and diversify his wealth, and defer indefinitely a very large capital gain

• Reducing the buyout cost by allowing the company to take millions in tax deductions for the repayment of the ESOP debt

• Enabling the company to continue its growth and dedication to excellent customer care while controlling its own destiny

• Creating a new company funded retirement benefit for the 100+ employees

 While every transaction is unique there this one has a lot in comment with many goals of private businesses using ESOPs for part of their ownership transition plan. Don’t hesitate to call if you’d like to learn more about how an ESOP might work at your company.