The Client Situation
An owner of a business with a highly dedicated staff had wanted to leave his company. His preferred choice of exit was to pass the torch on to his management team and employees in recognition of their dedication and contributions to the company over the years. The employees, however, did not have the cash they would need in order to purchase the business for what it was actually worth. While the business owner was willing to negotiate, make some concessions, and also consider other options in order to complete a management buy-out (MBO), he still wanted a fair payout for all the years of sweat equity he had invested in building the business.
The TobinLeff Solution
As our advisory team does with every one of our client assignments, we entered into the engagement with no pre-conceived solutions in mind. We hold the belief that, to truly help owners maximize their business value, our mission as M&A advisors is to assess all of the facts and thoroughly provide our clients with the information they need to make informed decisions that are based upon a full understanding of the various exit plan options available to them. We utilized our proprietary valuation method to place a value on the business and then created alternative financial models that illustrated the economics and workings of:
- A management buy-out (MBO),
- What selling to a third party buyer would look like,
- And the establishment of an ESOP.
After several presentations to the client to discuss their exit plan options, his managers, employees, and the firm’s advisors, all parties agreed that the ESOP would best benefit all parties involved. That meant our client received 100% of his equity stake once the deal closed.
Get in contact with the TobinLeff team today to learn if an ESOP is the best exit strategy for selling your company.
