E198: Unlocking Business Exits with ESOPs: Exit Strong with Employee Ownership with Michael Bannon

How2Exit: Buy, Don't Build - M&A of Small Businesses

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About the Guest(s): Michael Bannon is an expert in employee stock ownership plans (ESOPs) with a seasoned background in private equity. His career began in a fund-of-funds sector where he managed investments across the Asia Pacific, offering him a diverse understanding of market cycles, politics, and economics. He later joined CSG Partners in the United States to be closer to business owners and offer them unique exit strategies that align with their objectives. At CSG, he specializes in ESOPs, working intimately with clients to quarterback ESOP transactions, including analysis, capital raise, negotiation, and closing across various industries.
Episode Summary: In this engaging episode of the How2Exit podcast, host Ronald Skelton invites Michael Bannon to dive deep into the world of Employee Stock Ownership Programs (ESOPs). The conversation is not only a brilliant learning opportunity but also a shareable resource that sheds light on the intricacies of ESOPs.
Throughout the episode, Bannon draws from his extensive background in private equity and ESOPs to unravel the concept comprehensively. He explains the attractive tax advantages for selling shareholders, the benefits for employees as new shareholders, and the positive impact of ESOPs on the broader business community. From discussing pathways for funding an ESOP to demystifying the employee experience post-transition, Bannon offers valuable insights into how ESOPs can be an ideal exit strategy for business owners looking to preserve legacy and engage employees in ownership.
Key Takeaways:

• ESOPs serve as a tax-advantaged exit strategy enabling employees to earn shares without direct cost, offering fair market value liquidity for business owners.
• There's a dual benefit for the sellers and employees; sellers receive immediate or deferred compensation for their equity, while employees get a stake in the business as part of their retirement plan.
• An ESOP can flexibly fund the purchase of shares through bank loans and seller financing, with significant tax savings effectively covering transaction costs.
• ESOPs impact the community by keeping the business local, retaining jobs, and allowing profit to stay within the community rather than going to external investors.
• Post-transaction, the company undergoes annual valuations, informing employees of their share value growth, fostering an ownership mindset that enhances productivity.

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Contact Michael on
Linkedin: https://www.linkedin.com/in/michael-bannon-85b16159/
Website: https://www.csgpartners.com/
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