• Product engineering and manufacturing company primarily serving the aerospace and defense industry
  • 100% owned by the President, 500 shares issued and outstanding
  • S Corporation valued at $14,500,000
  • The company maintained high profit margins, employed 25 people and had a payroll under $1,500,000


  • Owner wanted liquidity and a way to phase out of the company over the next 5 years
  • Successor management had been identified and all responsibilities would transfer over to the management team during the 5 year period
  • Reward long term employees
  • Reduce taxes


  • Implement ESOP for 95% of shares, with the selling shareholder retaining 5% to maintain control
  • Sell 5% of the stock held outside the ESOP to successor management within 5 years or upon death
  • Borrow $3,000,000 (max) from bank as senior 5 year debt at 4.0%
  • Seller to finance $10,775,000 (balance) as subordinate 10 year debt payable at 4.0% but effective mezzanine market rate was 16.2%
  • Warrants were issued for NPV of difference (actual vs. owed) exercisable when debt is extinguished

Benefit to Client

  • Orderly transfer of stock and control according to seller’s wishes
  • Owner received immediate cash of $3,000,000 and notes totaling $10,300,000 over 10 years
  • Estimated corporate tax savings of over $17,032,000 over next 10 years
  • Employees receive significant additional retirement benefits
  • Seller gets an additional $7,500,000 in 10 years when warrants are exercised