Leveraged ESOPs and Employee Buyouts - Softcover

Rodrick, Scott

Softcover

ISBN 10: 0926902628 ISBN 13: 9780926902626

Publisher: National Center for Employee Ownership, 2000

Synopsis

An ESOP (employee stock ownership plan) is a tax-qualified benefit plan that is designed to invest primarily in company stock. Among other things, an ESOP can be used to purchase shares from retiring owners in closely held companies; buy out divisions, product lines, or entire companies; finance new capital; and provide a tax-advantaged employee benefit. There are over 11,000 U.S. companies with ESOPs, covering well over 8 million employees.

Many ESOPs are leveraged, meaning that the plan borrows money on the employer company's credit to buy company stock. It is the only qualified employee benefit plan that can do this. Moreover, the company can deduct ESOP contributions it makes for both principal and interest payments for the loan, and owners of closely held C corporations who sell to an ESOP can avoid paying capital gains tax on the sale proceeds by reinvesting them in qualifying U.S. securities.

Written by leading experts, this book is a practical tool for business owners, managers, and advisors dealing with both public and private companies. It covers contribution limits, valuation issues, accounting, the tax-deferred "rollover," due diligence, feasibility, employee buyouts, multi-investor issues, mergers and acquisitions, and other relevant topics. The book is designed to be used by both public and private companies as well as their professional advisors.

About this title

From the Publisher:

Around the world, "ESOP" stands for different things, which sometimes confuses people. This book about the U.S. ESOP (employee stock ownership plan) and is of no practical value to those outside the U.S. It is not about stock options or related plans.

From the Back Cover:

During the past few decades, employee stock ownership plans (ESOPs) have become a familiar feature on the U.S. business landscape. There are currently over 11,000 companies with ESOPs; many of these ESOPs are leveraged, meaning that the ESOP has borrowed money on the credit of the employer or other related parties to buy company stock. It is the only qualified employee benefit plan that can do this. Moreover, the company can deduct ESOP contributions it makes for both principal and interest payments on the loan. This tax-advantaged leveraging capability makes the ESOP an ideal vehicle for several purposes, including buying out a company; divesting a subsidiary, division, or product line; enabling a public company to repurchase shares; restructuring existing benefit plans; and acquiring capital with a low-cost loan.

A leveraged ESOP can be the ideal vehicle for an employee buyout. In the past few decades, thousands of companies have been established through selling a company to an ESOP or through corporate divestitures to newly created companies that are at least 25% ESOP-owned.

ESOPs are complicated mechanisms, and using leverage increases that complexity. This book is designed to be a practical tool for anyone dealing with that complexity, whether the leveraged ESOP will purchase a small amount of stock or be used for an employee buyout of part or all of a company. Business owners, managers, their advisors, and others interested in employee ownership plans will all find this book helpful.

About this edition

• Publisher: National Center for Employee Ownership
• Publication date: 2000
• ISBN 10: 0926902628
• ISBN 13: 9780926902626
• Binding: Paperback
• Edition number: 1
• Number of pages: 272