ESOP Advisory

Through careful crafting, Capstone's ESOP Advisory Group can assure that your company's shareholders, management, and employees profit from the unique benefits that ESOP transactions can bring.

At a Glance

Not every business owner seeking personal liquidity desires to sell their company to either a strategic acquirer or private equity firm. Our dedicated Employee Stock Ownership Plan (ESOP) Advisory Group can provide an effective alternative for business owners wishing to transition ownership to management and employees while providing an attractive level of personal liquidity and maintaining operating control. These qualified, defined contribution employee retirement plans allow business owners to indefinitely defer all capital gains taxes and create an entity that minimizes or eliminates income tax.

Capstone Partners’ ESOP advisory group has more than 30 years of corporate financial advisory experience providing, ESOP advisory services to clients across all 50 states. They have deep experience in a variety of industries and practice areas including investment banking, tax, valuation, employee benefits and commercial banking. They will help you assess the attributes and viability of an ESOP, and will work diligently around the clock with your accounting and legal teams to ensure that the transaction achieves the best result for all involved and is well-executed from start to close.

Services Offered

Preliminary Analysis

Analysis of the key factors needed for the owner to determine if an ESOP is an appropriate path, including valuation, debt capacity, cash flow, tax savings, and objectives.

Feasibility Study

Rigorous analysis of the issues surrounding and relating to the overall plan of an ESOP, including projections, financing, organizational structure, costs, and other necessary details.

ESOP Implementation

Work as a “quarterback” or overall coordinator to organize and optimize the transaction and various professionals needed to successfully handle an ESOP transaction.

IRC § 1042 Design and Execution

Work with the owner, tax advisors, and financial advisors to design the transaction to secure the available capital gain tax deferral where available.

Repurchase Liability Study & Funding Analysis

Analyze the emerging repurchase obligation, measure the impact on cash flow, and propose various funding options to consider.

Employee Communications

Communicating the ESOP to the employees is critical to getting employee “buy-in” and achieving the full benefit of the ESOP inside the corporation. Our employee presentations have successfully launched the ESOP for tens of thousands of employees.

Common Questions from ESOP Advisory Clients

What is an ESOP?

ESOP stands for Employee Stock Ownership Plan. Much like a traditional profit-sharing plan, an ESOP invests primarily in the sponsoring of an employer’s stock. These qualified, defined contribution employee retirement plans allow business owners to indefinitely defer all capital gains taxes and create an entity that minimizes or eliminates income tax.

How Does an Owner Benefit From an ESOP?

There are a wide range of benefits of a well-executed ESOP transaction for business owners, including:

Receiving fair market value
Favorable tax treatment on sale
Flexibility; can sell any percentage of the company
Preserve legacy and culture as an independent company
Reward management and employees

How Does a Company Benefit From an ESOP?

There are a wide range of benefits of a well-executed ESOP transaction for enterprises, including:

Tax-advantaged financing
Potential for income tax-free entity (100% ESOP-owned S corporation)
Repay debt quicker with enhanced cash flow
Potential for productivity gains and reduced turnover

How Do Employees Benefit From an ESOP?

There are a wide range of benefits of a well-executed ESOP transaction for employees, including:

Valuable retirement benefits
Ability to participate in the value they help create
Continued employment
Incentive for management

What is the ESOP Process and Timeline?

Capstone’s ESOP Advisory Team aggressively handles all workstreams for clients to assure all outside parties receive and execute on necessary processes promptly. The average process takes approximately 3-6 months and includes the following steps: