Process Map Example

Business owner begins exploratory search for business ownership transitions, such as selling portions of stock, selling the company to Strategic buyer, management, employees, family, private equity firms. Usually, that means they talk to their local trusted advisor, who may not have the expertise in certain transitions.

At this stage, a business owner should be talking to their corporate counsel, their CPA, their Investment Banker, Valuation Firm, or other trusted advisors. If they don't have all of their advisors, ESOPMarketplace.com will provide you with seasoned experts in fields business owners may not already have in place.

By selecting the advisors from ESOPMarketplace.com, the advisors will help with decision making over time, as they don't just do ESOPs; They are transition experts!

Business Owners should select two quarterbacks, one internal person, and the other one of the advisors. While it may be wise to have only the owner, there are a number of activities that others beyond the CEO should be involved.

A virtual File Sharing App such as LockBox can help you securely store and manage your ESOP due diligence material. ESOPMarketplace.com clients have significantly reduced their implementation timetable.

Each Advisor should provide the owner with a document spelling out the agreed scope and charter for action.

Business Owners should select two quarterbacks, one internal person, and the other one of the advisors. While it may be wise to have only the owner, there are a number of activities that others beyond the CEO should be involved.

Documents should be CPA Prepared; Audited Statements are preferred.

Projections are internally developed; A CPA's review would be preferred.

Importance is to identify key managers and family members for retention or other compensation issues.

Census should include Demographic information such as age, length of service, as well as Salary/Bonus agreements, and other compensation plans.

Is there Common and Preferred Stock? Who owns what? How about Warrants and other synthetic equity? Is the stock in Trust? Who are the Trustees?

A written story of the goals and objectives is a great way to define who the advisors need to be and who is selected.

If there has been a formal valuation prepared recently, that should be available.

A Simple Valuation to develop a range of values, not a precise price; ESOPMarketplace.com advisors are experienced to develop accurate ranges.

ERISA law has a number of qualified and non qualified issues to be addressed.

ESOPs have great tax benefits for both the selling shareholder and the company.

A number of legal surprises surface in this stage to reduce due diligence effort later, selecting an ESOPMarketplace advisor will reduce costs during and after the transaction.

Additional Advisors could include Trustees, TPA's, ESOP CPA, just to name a few.

At some point, an estimated cost to complete the project will be developed to help in the decision making process.

Valuation Ranges don't meet expectations.

ERISA law has a number of qualified and non qualified issues to be addressed.

Tax benefits are not achievable or require changes in Plan Design.

Anti-trust, by-laws, or some legal issue.

Owner changes their mind, Conflict surfaces, Key Managers or family are threatened, or threaten to leave, unclear successor.

Costs are excessive or unclear.

For Go Decisions, continue; No-Go may require help.

A virtual File Sharing App such as LockBox can help you securely store and manage your ESOP due diligence material. ESOPMarketplace.com clients have significantly reduced their implementation timetable.

This is the most challenging part of the process. ESOPMarketplace.com valuation advisors are well experienced to avoid pricing and other plan issues with the Department of Labor (DOL).

Plan Design refers to the structure of the ESOP Trust and the rules by which beneficiaries are selected, distributed, vested, and allocated shares.

What are the tax benefits for both the selling shareholder and the company?

ESOPs, much like all other Qualified Plans require some level of Communication. However, to gain the value with ESOPs, developing a Communication plan and Committee will excite the employees on building an "Ownership Culture."

What are the compensation and employment agreements? Top Heavy profiles.

If the demographics are heavily aged, a study to determine cash flows on stock repurchase will be required.

For complicated and or High Dollar transactions, it is imperative an independent Trustee be involved in the transaction from the beginning. By selecting the Trustee early, they can be a wealth of help in selecting advisors and protecting the selling shareholder from DOL challenges.

(Third Party Administrators) Many employee benefit plans have highly technical aspects and complex administration requirements that can make using a specialized entity, such as a TPA, more cost effective than trying to do the same processing in-house. An ESOP, for example, must remain in strict compliance with ERISA, Department of Labor, IRS and Securities and Exchange Commission laws. Failure to remain compliant can result in the ESOP being disqualified. Such disqualifications create very real problems with employees, with corporate accounting, banking relationships as well as with the IRS. Selecting an ESOPMarketplace.com TPA will save you time, money and frustration both immediately and over many years.

Unless the selling shareholder will risk taking debt, the need for an ESOPMarktplace.com investment banker or financial advisor will help the owner navigate through the challenges of financing the transaction.

By having a wealth advisor involved, a number of financial strategies will align with the transaction.

Marketplace changes or disruptions change the valuation.

Employee Retention or other Compensation issues surface.

New Laws take effect, or other tax surprises.

A number of legal surprises surface in this stage to reduce due diligence effort later, selecting an ESOPMarketplace advisor will reduce costs during and after the transaction.

Corporate Counsel will be needed for developing final corporate structure.

Banking and funding sources can change the funding requirements.

In some cases, Board and Shareholder approval is required.

Our ESOPMarketplace.com Advisors can help your management team with communication, training, Culture development and forming the ESOP Committee.

For companies going over 51% ESOP ownership, the need for a functional Board of Directors is high. Best Practices have shown independent directors help ESOP management with difficult decisions. ESOPDirectors.com is a community of CEO's and Board Members that helps in searches for directors experienced in ESOPs.

Working with the Board, the ESOP Committee develops a communication plan that educates employees of the ESOP plan and how their work affects their stock value. By using ESOPMarketplace.com communication advisors, the management team accelerates the learning curve and quickly advances the ownership culture.

Working with the TPA and other ESOP Communication Advisors, the ESOP Committee would develop an annual shareholder's meeting where the CEO and key managers share the company's history and future in both economic and organizational ways.