As we enter 2026, the ESOP market continues to evolve.
From AI-driven owner awareness to increased private equity activity and expanding bank financing, the landscape is shifting. In Episode 14 of ESOP Radio, Trevor Gilmore and Ben Spadt share their Top 10 predictions for the year ahead.
Why This Matters
For business owners considering succession within the next 1ā5 years, market timing, capital availability, and legislative direction matter.
Several themes stand out:
Earlier, better-informed owner inquiries
More partial liquidity transactions
Growing institutional acceptance
Stronger employee demand for ownership
ESOPs becoming strategic ā not reactive
View Transcript
Introduction
Hi, everyone.
Welcome to ESOP Radio.
I’m Trevor Gilmore and I’m Ben Spadt.
And as we kick off
the new year,
let’s share
our own top
ten predictions
for the ESOP market in 2026.
Trevor, what’s your top five?
Trevorās Prediction #1: AI & Owner Awareness
Yeah. Thanks, Ben.
And I think about 2026 and the trends
we see out there,
technology companies that we do
business with,
you know, so on general economy,
what do I predict this year?
So here are my top five.
Number one, I predict I will increase
the use of awareness
as a tool for business owners.
And what I mean by
that is you have ChatGPT of Claude etc.
out there,
a lot of data
already on valuation multiples.
What the ESOP option looks like
and so on.
So I fully expect
more and more business owners
will be using that and getting educated
before going down the path.
Partial ESOPs for Gen X Liquidity
Number two, more companies
owned by Gen Xers
will use partial esops for liquidity.
Been seeing
this a lot
with our client base
past couple of years.
Younger owners wanting to sell
partially to these
that I’ve meaning you know, less than 50%
get some cash out reward and incentivize
all employees.
I don’t expect that trend to slow down.
I think it will increase.
People are very intentional
about what they want
for the future, for themselves
and for their company.
And number three,
Private Equity Exit Activity
I predict more PE companies
will look at Esops
to offload their portfolio companies
private equity
companies are sitting on
so many portfolio companies.
And last couple of years
I’ve had a lot of discussions
with PE funds
saying, hey, let’s take a look and see
what the Esop option looks like.
Big issues.
There are value structure and financing
to make the whole thing work
as a viable exit tool.
Increased Bank Lending
Number four,
I expect to see more banks
lending money to Esops.
A lot of the big banks out there,
and even small regional banks
really want to lend to high quality
Esop companies.
We get calls all day
long from banks
in Haiti of deals for us to look at.
So I think that will be a net positive
for the industry,
meaning more capital
to help these deals go through.
Rising Employee Demand
Number five, I expect to see
an increased demand from employees
for employee ownership
as more employees are out there
to create
nice Esop account balances
and having skin in the game.
They talk to their friends,
their family, etc.
and they spread the word.
So I expect to see
a lot of employees say, hey,
I want to work for Esop owned company
and maybe there’s
a bit of a premium there. Right.
If you’re an ace up own company.
Yeah. So that’s my top five.
There have been and it’s
going to kick it over to you.
What do you predict this year.
Yeah Trevor those are great.
And they’re pretty wide ranging
I think that,
you know, you
touch on all aspects of of
where esops come into play.
And there are some
pretty interesting trends.
For me, mine’s
kind of broken up into two hot takes
and then, three maybe trends that I see.
So the first two are number one.
Benās Prediction: Cannabis ESOP
We’ll see our first cannabis
company, Esop, in 2026.
I just think with,
you know, changes
in regulation federally,
as well as the prevalence of states
that do have
legal cannabis
dispensaries, growers, etc..
It’s just bound to happen.
I don’t know when or you know,
what a company would look like
that would make a good candidate.
But I just feel that our first
cannabis company will become an Esop in
in this year.
Baby Boomer & Gen X Exit Wave
Number two,
we’ll have,
the perfect storm of baby
boomers, Gen Xers leaving, either in part
or in full,
the businesses that they started.
Kind of touching on your point
about Gen Xers earlier,
but we’ll also see some more pro
Pro-ESOP Legislation
Esop legislation,
perhaps around
what is fair
market value for these transactions,
you know, perhaps about
can we offer incentives
to sell to your employees?
Some states are already doing that.
But, you know,
there might be a larger
push federally because esops
are, by and large, are bipartisan.
Tool and they get bipartisan support.
Number three, I think as companies,
AEC Firms Leading Adoption
you know, that’s
architecture, construction
and engineering,
those companies will continue
to lead the charge
and implementation of Esops.
We see more and more
that those companies are ripe for,
this type of,
long term employee benefit
that, the makeup and the,
the culture in those companies
seem to seem to lend themselves
well alongside the financial aspects.
Number four,
I think building an ownership culture
Building Ownership Culture First
before implementing an Esop
will become more commonplace.
We’re seeing a lot of companies
implement things like iOS
or some type of, either entrepreneurial,
mindset or ownership mindset
to engage and empower the workforce.
And an Esop is a tremendous tool
that can be sort of
icing on the cake there once
everybody’s rowing in the same direction.
And then
finally, number five,
ESOPs as Strategic Tool, Not Last Resort
I think Esops will no longer
be seen as a last resort.
You know, a lot of times they got,
kind of shoved off in the corner
and just saying,
you know,
it’s not what you want
if you can’t find a buyer.
If otherwise, you’re
just going to shutter your doors.
You know,
perhaps an esops are good option.
I think they’ll become more
a strategic tool
for competitive advantage,
not only as an exit strategy.
Leaving a legacy,
but, you know, keeping your
company in the town that it exists.
A competitor’s not coming in
and just sweeping up that market.
And sweeping up that market
and implementing their own
policies, strategies,
whatever cost cutting measures.
So it’s a it’s a tool
to stay in your market.
And then also to,
attract and retain talent.
And in terms of it, employee is,
I think,
kind of, touching on your point
a little bit
about the employee demand, more and more
employees are seeing
what a big benefit that this can be.
What a meaningful benefit.
And I think that’s, that’s
going to be
one of the biggest trends in 2026.
So, Trevor, that’s that’s what I’ve got.
And that makes our top ten.
What do you think about that?
Awesome.
Ben, I totally agree with you.
I think we’ll see a cannabis
Esop out there.
So 2026, let’s see what happens, right?
That one and a half more months ago here.
And,
you know, your last one there about,
your company’s being more attention
and employee ownership.
You know, and culture and so on.
Employee ownership mindset, right?
Skin in the game, all that good stuff.
Branding & Ownership Premium
It’s kind of dovetails with the trend
we’re seeing here is companies
that actually are proud to be up. Right.
And, you know, in the past
and companies highlight
the fact that they were maybe maybe not.
Right.
You know, but companies now are very much
given the message front and center.
Hey, we’re Esop owned,
give you skin in the game. Right.
And it’s almost becoming
sort of like a premium
experience with an employer
to be part of an Esop, right?
You know, compared to some company
that isn’t.
So, you know, I bet branding and so on.
I think we’ll see more of that,
you know, kind of a premium applied
to Esop owned companies and especially,
you know, with employees. Right.
See they who don’t want to work for,
you know,
Weāre an Esop as well.
You know here at Menke
if we sell them you know we’re Esop.
You know we truly live and breathe it.
Thanks everyone for joining us today.
Have a great happy New Year. Talk soon.
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Phil DeDominicisĀ is an ESOP strategist and M&A advisor who has guided 300+ companies through ESOP formations, financing, and transactions overĀ 20+ years at Menke & Associates. He specializes inĀ selling ESOPāowned businessesĀ to financial or strategic buyers and inĀ helping ESOP companies acquire other businesses.
