Journey to an ESOP & Beyond

In this podcast episode, ESOP attorney John Burgess returns to share what business owners should anticipate in the months following an ESOP transaction. From governance changes to employee communication and administrative next steps, Burgess offers practical insights to help new ESOP companies navigate the critical post-formation period with confidence.

On this podcast episode we reference the movie Kon Tiki, which documents the journey of a Norwegian scientist on a raft built with natural materials and proves the ancient peoples sailed to the Polynesia islands.  The trip took 4300 miles in ocean currents without a motor. The podcast uses the concept of “wind in the sails” to review the tax benefits that ESOP companies experience. Specifically, this episode dives into defining an S-Corporation ESOP, which means that either in part or in whole the ESOP-owned company has a permanent tax benefit given the income tax is exempt on both the state and federal level.  

On this podcast episode, we interview Andy Hines - founder of Hines Pool and Spa from Austin, TX. Hines Pool and Spa is an excellent example of a successful approach to an ESOP transaction.  Andy shares his experience with researching ESOPs in relation to Private Equity.  Like many companies, Andy found that the ESOP was a better alternative for not just the company, but for himself and his family. Andy shares some of the lessons he learned early in the process, providing some practical tips for those on their own journey to an ESOP. 

On this episode, we dig into a better understanding of the buy side team for an ESOP transaction. This would include the Trustee, Evaluation Firm, and their legal counsel.  As you invite them into the ESOP deal, they are in a sense the enemy and there are certain aspects of working with them in this process that are important to understand so that you can be better prepared for your transaction and your journey to an ESOP.

As the podcast discussed at the beginning of the new season- we wanted to give a strong overview of the Third-Party Administrators (TPAs) role in the ESOP. On this episode, the podcast interviews Tom Roback with Blue Ridge. The episode looks at the trends in the ESOP community and the consolidation of TPA companies.  We look to answer what challenges with TPA firms are currently being experienced and how TPAs (particularly Blue Ridge) are looking to overcome those to provide a strong partnership with their clients. Tom does an excellent job walking through a a various list of topics - this should be a helpful podcast episode along your journey to an ESOP.

Power Rangers are an excellent example of strength in combining multiple superheroes on one team. On this episode we consider: What is your company worth?  What happens when we combine it with another then another? The value could significantly change for better multiples and for multiple reasons.  One of those would be a larger combined EBITDA with a reduction in redundant expenses.  Another could be the risk profile is reduced given larger geographic and higher diversification of revenue. Whether you sell to an ESOP or another buyer, through this podcast episode we discuss the multiple reasons to consider this approach. 

In this episode, we sit down with Kevin Birch, Regional Manager at CNA Surety, to explore best practices for contractor ESOPs. A key theme throughout our conversation is communication—and lots of it. One of the biggest mistakes a contractor can make is surprising their surety with news of an ESOP transaction. Kevin strongly recommends that contractors—whether general or specialty—get their surety agent and company involved early in the process. Doing so allows the proposed ESOP structure to be reviewed and vetted, ensuring buy-in from your surety partner. Throughout the podcast we discuss how critical it is to present models that illustrate valuation, cash flow projections, debt structure, and pro forma balance sheets. These elements are essential for the surety to properly underwrite the transition and help avoid issues with your bonding line after the ESOP is in place. 

The show “Band of Brothers” offers a perfect example of leadership from the character of Captain Sobel and provides examples of overcoming obstacles to establish a strong culture. Specifically, the show provides an example of an employee-centric culture: a culture that embodies a solid group of employees ultimately banding together.  This episode covers the 5 c’s of an employee-centric culture: Commitment; Care; Celebration; Communication and Community. The topic might be helpful to assess wherever you are in your journey to an ESOP as you build, improve, or sustain the culture of your business. 

In this episode the podcast discusses the recent uncertainty with the economy and how this effects the ESOP world. Considering this, the podcast interviews senior level banker Chris Cucci with Climate First Bank. Chris’ bank does financing for ESOP deals all over the United States, providing valuable perspective on ESOP financing credit decisions in light of the first quarter of 2025. While the future of recent economic events in unpredictable, the important take away from this episode is to build your ESOP around the ability to flex with any changes in the economy. 

Dive into the fascinating world of Warrants and Stock Appreciation Rights (SARs) in Employee Stock Ownership Plans. Discover how synthetic equity can create a win-win for both shareholders and companies. The podcast cleverly uses the Nicolas Cage film 'Knowing' to illustrate how these financial tools can help predict and shape a company's future. It's all about creating a legacy while rewarding those willing to take risks. Tune in for insights on balancing interests in ESOP transactions!