With stock prices perched at precarious levels, and an Internet-technology stock selloff already partially in motion, there’s a great anxiety among many business owners and investors hoping for a smart exit strategy.
My friends at private equity funds are loaded down with some 7,500 portfolio companies and would like to greatly reduce that number, book some big gains and focus on tomorrow’s acquisitions. Venture capital funds are eyeing the mythical IPO window, wondering whether the startup they’ve backed can squeeze through or will have to wait – a delay that could necessitate another round of investment by funders.
Our economy certainly benefits from the dynamic and varied nature of U.S. capital markets. But for a lot of companies, especially relatively stable middle market service and manufacturing concerns, a durable ownership structure, as opposed to one that changes twice a decade, helps build long-term value best. I’ve spent my career helping founder/entrepreneur/owner/CEOs structure Employee Stock Ownership Plans, or ESOPs, that offer just such durability.
If you’ve thought about selling your business, here’s a quiz that will help you better understand ESOPs.
1. ESOPs are pretty rare, right – I’d be the only one within miles?
Probably not. With more than 11,000 ESOP companies in the U.S., they out-number private equity-owned companies – roughly 7,500, as reported above – and the roughly 5,000 companies listed on either the New York Stock Exchange or on Nasdaq. ESOPs collectively employ more than 10 million workers in the U.S., and the ownership format is typically more stable than others.
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Source: Mary Josephs (www.forbes.com)
