Robert Reavis: Is an ESOP the Smartest Exit for Owners?

Robert Reavis is a director at ButcherJoseph focused on employee-ownership transactions, and we spoke about how ESOPs really work, what control owners keep after closing, the tax levers that often make the math compelling, how to prepare years in advance, and when a dual-track (ESOP vs. third-party sale) makes sense.

He lays out ESOP 101 in plain language: “an ESOP is effectively a sale of the business to a trust that benefits the employees, typically with favorable tax treatment.” Think house financing: “If you were going to buy a house, you would typically put 20 to 30% of the purchase price down… [and] get a loan for the remaining 70%.” In ESOPs, the trust borrows 60–70% and the seller carries a note for the rest, then company cash flows retire the debt over time.

Control and confidentiality don’t vanish post-close. As Robert puts it, “The day after the transaction, the owner will typically retain board control and the managers… will remain in place and continue almost exactly as before.” Employees don’t suddenly run the shop or see everything: “employees typically gain little or no incremental financial information…” His blunt myth-bust: “this isn’t… a conversion to communism where an employee or a worker group gets together to kind of run the day to day of the business.”

Complexity? Manageable with the right team: “once you understand… the core functioning… most of the other details have flexibility and are easy to follow.” The payoffs can be significant: sellers can “elect to defer the capital gains… and roll that portion into qualifying replacement property,” and on the company side “many S Corp owned esops pay no tax whatsoever.” That’s why, “in many cases the amount that the company will save in income tax is roughly equivalent to the amount of debt service that is required to finance the transaction.”

Timing matters. Even years out, you can increase optionality by cleaning up financials, tightening reporting, identifying next-gen leaders, and aligning estate-planning liquidity targets. ESOPs aren’t perfect for every business (highly irregular cash flows, heavy capex, or strategic fit elsewhere), so Robert often runs a “dual track process option… while at the same time pursuing a third party sale”—letting owners compare real terms, side-by-side. And the first step? “it all starts with a conversation with a knowledgeable counterparty.”

What you’ll learn

• How ESOP financing actually works (bank debt + seller note) without “giving the company away.”
• Why owners typically keep board control and why employee information rights stay limited.
• The key tax levers for sellers (capital-gains deferral via qualifying replacement property) and for companies (S-Corp ESOP tax exemption).
• Practical pre-exit prep that boosts valuation and deal readiness years ahead.
• When ESOPs are not ideal—and how a dual-track process creates leverage and clarity.