Smart Business Dealmakers: The Middle-Market M&A Podcast

The ESOP Exit: Rethinking the Endgame

24 snips
Sep 25, 2025
Join Andy Rudolph, a partner at Royer Cooper Cohen Braunfeld with a knack for ESOP transactions, Marc Hirschfield, an advisor skilled in financing ESOPs, and David D'Alessandro, an expert in transaction mechanics, as they explore the often-overlooked Employee Stock Ownership Plans. They discuss the compelling tax benefits, the integral roles of key parties in a deal, and what steps founders should take for a smooth transition. Discover how ESOPs not only secure legacies but also foster a thriving ownership culture within companies.
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INSIGHT

ESOPs Offer Distinct Strategic Advantages

  • ESOPs offer unique tax and structural advantages that can make them more attractive than third-party sales.
  • They enable flexible founder roles and often higher assurance the deal will close compared to outside buyers.
ADVICE

Prepare For Rigorous Bank Diligence

  • Prepare for extensive lender diligence if the company lacks prior bank financing.
  • Build relationships with banks early and be ready to deliver substantial documentation.
ADVICE

Use 1042 Rollover And S Election Strategically

  • If sellers qualify, use a 1042 rollover to reinvest proceeds in replacement securities and defer capital gains tax.
  • Then convert to an S corporation post-close so the company’s share of income attributable to the ESOP is tax-exempt.
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