A practical guide for owners & managers weighing a management-led acquisition This Menke guide—authored by Phillip DeDominicis, Managing Director (Investment Banking)—explains how to evaluate, finance, and execute a management buyout (MBO), including when to consider an ESOP in the mix. You’ll learn what qualifies a company for an MBO, how to value the business, how…
How to run a disciplined, value-maximizing sell-side process Thinking about a third-party sale? This Menke guide walks owners and boards through a structured, multi-round process that protects confidentiality, keeps bidders competitive, and maximizes certainty of close. You’ll learn how to prepare, market, negotiate, and close—while selecting the deal structure (asset vs. stock vs. merger/§338(h)(10)) that…
Employee Stock Ownership Plans (“ESOPs”) are federally qualified employee benefit programs governed by U.S. law. Since our president and founder, John Menke, wrote some of the original ESOP legislation in 1974, more than 25 additional laws have been passed to promote and broaden the benefits of ESOPs. In general, ESOPs offer owners of companies tax…
Trust and security are more important than ever, and when it comes to your company’s ESOP, this is especially true. Employees and stakeholders must know that their data is safe and that related reporting processes are managed rigorously. SOC 1 and SOC 2 reports, produced by an independent certified public accounting firm following a comprehensive…
ESOPs were first authorized by federal legislation in 1974. Since that date, there have been more than 25 separate pieces of legislation that have further defined what an ESOP is and what an ESOP is permitted to do. Despite this fact, there are more misconceptions about ESOPs than about any of the other similar financial…
On October 12, 2023, the Social Security Administration (SSA) announced the 2024 Social Security Wage base increase from $160,200 to $168,600. The IRS (Internal Revenue Service) announced the 2024 cost-of-living adjustments for various retirement plan limits on November 1, 2023. Below are selected adjustments applicable to employer-sponsored retirement plans effective January 1, 2024. Additional details…
It’s not every day that the Wall Street Journal features one of your clients. The end of 2023 saw that spotlight shine on Menke client Hyperion Technology Group touting it as a success story in an article about Mississippi and the American South. Competitive salaries and benefits burnish Hyperion’s reputation and standing, CEO Geoffrey Carter…
Small businesses looking to transition to an employee-owned model through ESOPs can benefit greatly from two recent pieces of regulatory guidance from the Small Business Association (SBA) which bring positive changes to the financing landscape for ESOPs. These important pieces of guidance are Procedural Notice 5000-846607 and SOP 50 10, Version 7, both of which…
Why Selling to an ESOP May Be the Smartest Way to Unlock Your Company’s Value If you own a successful privately held business, your company is probably your most valuable asset. When it’s time to consider liquidity or an exit, you want financial security — but you also want to protect your employees, preserve your…
A recent article in Middle Market Growth magazine explores a new trend in private equity: investing in companies with employee stock ownership plans (ESOPs). Private equity has traditionally shied away from these companies, seeing ESOPs as an ‘either-or’ proposition. However, private equity investors are looking at ESOPs with fresh eyes. Recent Federal legislation may well…
ESOPs are a powerful tool for businesses, as they can help to align the interests of employees with those of the company and can also serve as a means of attracting and retaining top talent. The United States Congress recognized these advantages when they passed the 2023 Omnibus Bill, a comprehensive spending bill that funds…
Research shows that companies with Employee Stock Ownership Plans (ESOPs) consistently outperform their peers in productivity, growth, and resilience. Executive Summary Employee Stock Ownership Plans are more than a succession or tax strategy—they are a proven performance model. Decades of economic research show that when employees have a meaningful ownership stake, companies become more productive,…
Reposted from the original article at Business of Home HEATH CERAMICS, MADE ITS EMPLOYEES INTO OWNERS. SHOULD YOU? JAN 9, 2019 FRED NICOLAUS In 2015, Robin Petravic and Catherine Bailey, co-owners of iconic California ceramics brand Heath, were looking ahead to the 15th anniversary of their tenure. Over the last decade, the couple had transformed the company from a struggling…
By John D. Menke, Esq. A & E firms, like other service businesses, face two challenges to business succession. First, how will the firm finance the buyout of the founders when they are ready to exit the business? Second, how will the firm best be able to provide equity incentives to attract and retain key…
This may be the opportune time to take action to avoid the increase in capital gains tax rates that will most likely take effect next year. According to the Kiplinger Tax Letter, Congress will likely increase the tax rate on long term capital gains for high income individuals from 15% to 20% starting next year.…
ESOPs were first authorized by federal legislation in 1974. Since that date, there have been more than 25 separate pieces of legislation that have further defined what an ESOP is and what an ESOP is permitted to do. Despite this fact, significant misconceptions about ESOPs persist. The following describes some of the more prevalent myths…
Advantages to C Corporations Many companies that have ESOPs fail to realize that their ESOP can be used to the finance acquisitions with pre-tax dollars. Normally, when debt is incurred to finance an acquisition, only the interest payments are deductible. Principal payments are not deductible. However, if the acquisition is financed through an ESOP, both…
Why Selling Your Stock to an ESOP is Better than Selling to a Third Party If you are the owner of a successful decorative plumbing or hardware business, sooner or later you will face the prospect of having to exit the business, either because you wish to retire or because you wish to cash in…
Distributions from an ESOP in the form of shares of company stock have many advantages. One of the compelling reasons for making distribution in the form of company stock, for example, is that distributions in the form of company stock enable participants to have a portion of their distribution taxed at long term capital gains…
A “perfect storm” has hit the U.S. economy and its privately-held businesses. Consumer purchasing power has dried up, resulting in reduced revenues for almost all privately-held businesses. At the same time most banks have stopped or curtailed lending, and bank credit is no longer available to many businesses. During the past two quarters many businesses…
Background One of the concerns that arises in the case of a company that is 100% owned by its ESOP (or where an ESOP owns less than 100% of the outstanding stock, all of the stock held by the ESOP is allocated, and the ESOP will not be acquiring any additional stock) is that once…
A “perfect storm” has hit the U. S. economy and its privately-held businesses. Consumer purchasing power has dried up, resulting in reduced revenues for almost all privately-held businesses. At the same time most banks have stopped or curtailed lending, and bank credit is no longer available to many businesses.
Virtually every ESOP appraisal that has been written in the past 10 years has concluded that, both in the case of purchases of company stock by an ESOP from direct shareholders and in the case of subsequent distributions and repurchases of company stock to and from plan participants, the discount for lack of marketability is…
By: John D. Menke There are good reasons to consider selling your firm to your own employees through an Employee Stock Ownership Plan (ESOP). No other alternative combines maximum financial advantage with the flexibility that enables you to customize the sale to fit your own particular circumstances. An ESOP enables you to sell your business…
Here is a video posted by one of The Menke Group’s Clients: WinSystems, an embedded PC designer and manufacturer, provides a high level of quality and customer service through an Employee Stock Ownership Plan (ESOP). This leads to employees holding a direct stake in maintaining a high level of customer service. Here is the full…
Section 409(P) of the Code, which was enacted as part of the Economic Growth and Tax Relief reconciliation Act of 2001, sets forth anti-abuse rules for ESOPs that are maintained by S corporations. The following is to summarize the restrictions of Section 409(P), as follows: Basic Rule: No assets of an ESOP may be allocated…
The exit strategies available to owners of electrical wholesaling firms are somewhat limited. The available strategies include selling the business to a competitor, selling the business to the management employees, or selling the business to all of its employees under the provisions of an Employee Stock Ownership Plan (“ESOP”).
USES OF AN ESOP A Readily Available Market for Controlling Shareholders Frequently, controlling shareholders desire to sell a part of their shares in order to diversity their holdings, or to provide liquidity for investment or estate planning purposes. Usually, however, there is no market for the sale of a minority interest in a closely-held company.…
WHAT IS AN ESOP? The best way to explain an ESOP is to compare it to a profit sharing plan. ESOPs can do all the things a profit sharing plan can do. However, ESOPs can do a great many things that profit sharing plans cannot do. Profit sharing plans are regarded primarily as employee benefit…