BACKGROUND

• Divisions: civil & excavation, electrical & instrumentation, high voltage, wireless & communications
• Located in Utah with other locations across Wyoming, Texas, North Dakota, Colorado & Kansas
• S Corporation with approximately 300 employees
• Company value $54,100,000
• 12 shareholders, several family members involved in the business

GOAL

• Founder and shareholder with more than 50% ownership was looking for an exit strategy
• Looking for liquidity and a tax effective way of passing ownership to his family members
• Interested in retaining & motivating existing employees while having a tool to attract new employees

SOLUTION

• Establish an ESOP
• All shareholders will sell 100% of their stock to the ESOP
• In exchange for selling their stock sellers will receive cash and notes
• Company will borrow $12,200,000 in senior debt to fund the payoff of shareholder’s Accumulated Adjustment Account balances and the remainder will be used towards the stock sale

BENEFIT TO CLIENT

• Owners received $9,600,000 cash at closing for payoff of AAA notes and stock sale down payment
• Some shareholders were cashed out entirely, others received cash and seller notes
• 15 year seller notes totaling $44,500,000 at a 4.5% interest rate (life of loan interest = approx. $13mm)
• Shareholders received 1,500,000 warrants to divide between seller note holders
• At the end of the seller note period the projected value of warrants is estimated to be $40,000,000
• As a 100% S Corp ESOP owned company, 100% of future profit will not be taxed from that point forward
• Over the next 15 years the corporate tax savings are estimated to be over $67,000,000