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
LOOKING TO ESTABLISH YOUR ESOP?
Fill out our free online consultation form to see if an ESOP is the right fit for your company.
