ESOP Feasibility and Strategic Alternatives

When planning the future of a business, due diligence and knowing all options is imperative. While an ESOP is one solution, it may not always be the best option to help business owners achieve their goals. Professionals from Stevens & Lee’s affiliated investment bank, Griffin Financial Group, are ideally positioned to help companies clarify their objectives and explore a broad range of strategic alternatives, including an ESOP, a leveraged management buyout, a dividend recapitalization, a partial or complete sale to a strategic or financial buyer, or numerous other possibilities.

If an ESOP is the best choice, our professionals assist clients by examining the size, structure and financing terms of the plan to ensure the transaction meets the owners and company’s goals. In some situations, this preliminary review may determine that an ESOP is not suitable, and in those cases, Griffin can help owners determine the best alternative structure to fit their unique situation.

If it is determined that an ESOP is the best option, Griffin conducts a thorough feasibility study to ensure the ESOP transaction goes smoothly. The feasibility study includes:

  • A preliminary valuation of the employer corporation to establish the approximate amount an ESOP may pay
  • An analysis of stockholders’ equity to assess the effects of the plan on existing shareholders and the company’s financial performance
  • A study of plan design to decide the optimal structure of the transaction and plan features that should be incorporated in the ESOP
  • A liquidity study determining the demands that the company repurchase obligations would eventually make on the sponsor company

Along with assessing the impact of the ESOP on the shareholders, the sponsoring company, the employees and the ESOP itself, the company’s debt capacity or borrowing capacity and future cash flows and cash needs must be taken into account. If applicable, Griffin can help raise the debt necessary to fund the transaction and all or a portion of the company’s future working capital and other needs.

Griffin has the expertise to assist companies in the due diligence process to ensure a successful path forward, whether or not that path includes an ESOP.