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Summary of Podcast on EP31 - Oceans 11 - Las Vegas - what questions should I ask at the ESOP conference! - The Grid Wiki

EP31 - Oceans 11 - Las Vegas - what questions should I ask at the ESOP conference!

Journey to an ESOP & Beyond

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| November 7, 2022

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This episode connects with my very first episode called “enough information to be dangerous” - the premise being that when you go to an ESOP conference there is so much information it can sometimes feel where should I start? I took some very specific questions and discussed them in detail so that you have some ideas of what to focus on depending on whether you are going to the conference on your journey to an ESOP or if you have already arrived and have an existing ESOP company.

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Good morning morning please state your name for the record.  Daniel ocean thank you mr. ocean the purpose of this hearing is to determine whether if released you are likely to break the law again.  Well this was your first conviction you have been implicated though never charged and over a dozen have a confidence schemes and frauds what can you tell us about this.    [0:36] As you say ma'am I was never charged.    [0:40] Mr. ocean what we're trying to find out is was there a reason you chose to commit this crime or was there a reason you simply.    [0:48] My wife left me I was upset I got into a self-destructive pattern.    [0:56] Is it likely to fall back into a similar pattern she already left me once I don't think she'd do it again Just for kicks.    [1:04] Mr. ocean what do you think you would do if you're late.    [1:09] Mister ocean what do you think you would do if you're released now.  I am getting ready to go on an airplane and go to none other than Vegas Vegas is one of the biggest ESOP conferences.  Every year and I was thinking about this conference.  In relationship to the my pod to the podcast for the ESOP guy journey to an ESOP and as I think about preparing to go to Vegas.  I was thinking about this movie Ocean's Eleven and how in this scene.    [1:45] The main actor who's George Clooney gets out of prison so he immediately is going to go back to wear to Vegas.  And what does he want to do he wants to accomplish his goals and dreams and so just like that we think about the ESOP.  Conference and as I think about this topic what I'm going to talk about today is,  preparing to go to an ESOP conference what should you do in kind of when you think about it from the standpoint of who you are obviously that's going to dictate a lot of what you're going to do at the conference.  Now my very first podcast that I did is called enough information to be dangerous that was.  Almost 33 years ago I think so yeah almost and so the first season.  And one of the things I was trying to convey at that point in time when I was first starting as is the mission that we were on for the podcast which was.    [2:42] One one part of it that I felt really passionate about and reason the to do the podcast was because I felt like there was a need in the marketplace.  For good not just information but good information but in and also information that would help under help people to understand and frame out what's important.  In the ESOP and so when I think about this going into the ESOP conference as we start to get ready for the plane trips and all these people flying in and and going.  What's going to be different sessions networking a lot meeting with a lot of people and asking a lot of the same questions over and over again.  And so this podcast today is going to be about what questions should you ask at the conference as you go,  and so I'm excited to do that we're going to use the Ocean's 11 as that as the way to kind of think about Vegas a little bit and in turn what were there to accomplish now.  I know,  you know the movie itself is fun and it's interesting because they're like okay they've got the way that the movie is written it's like are they've got the bad guy who is the casino guy who owns everything,  how twisty at all is like we end up rooting for the bad guys at the end of the day we want them to be able to steal this money because that's what they are they're criminals.    [4:06] Either way it's a great what this what this movie is great about is debuting the Vegas seen and whether you like it or you don't like it.  It's there and a lot of people are going to show up over the next couple days to look at in disgust and listen to and contemplate and.  You know and then there's the ESOP people to pontificate on Aesop's in one of the things I want it I want to do with this as we talk about what questions to ask is.  I want to help you,  prepare for these types of conferences and be able to ask good questions when you get into it because one of the things I hate about our industry is the way people do pontificate they they make ESOP sounds so much more.    [4:51] Difficult complex you know in and they're reaching for something there that I just drives me kind of crazy so that's what I'm going to try to accomplish today with this podcast,  and hopefully I can get it done before I have to get on the airplane so thank you guys for checking us out if you do have an interest in in.  What we're doing here it's called the theesopguy journey to an ESOP you can go to our website at journey to an ESOP.com.  You can click and subscribe to our podcast which I think is a very if you think this is a good resource for you I think it's a very good idea because we all tend to get busy,  when you do subscribe usually get like a pop up on your phone that says hey here I am theesopguy ready for another whatever I'm going to do.  Also if you have a friend you're like hey I know my other buddy who's doing this they're going to they're they're thinking about an ESOP let them know about the podcast is a resource to them as well and if you have the technological advantages of,  younger people and can figure out how to do the reviews,  please do that and give us a good review if you think it's a good resource so with all that I'm excited to get into the questions you should ask conference at an ESOP conference.    [6:03] Gentleman the 3000 block of Las Vegas Boulevard.  Otherwise known as the Bellagio The Mirage in the MGM Grand together they're three of the most profitable casinos in Las Vegas let me see.  Is the vault at the Bellagio located below the strip.  Beneath 200 feet of solid earth that safeguards every dime that passes through each of the three casinos above it.    [6:31] We're going to rob it smash-and-grab job huh slightly more complicated than that oh yeah this is courtesy of.    [6:41] So here we are this is as we get into this first part of the podcast this is the plan now their plan is a heist our plan is to get into the Vegas conference,  and make sure that we're prepared now big picture things are like this and you've been to conferences before these are just kind of obvious.  Is what I always try to do is get there as early as I can and really make sure I understand the kind of the lay of the land its this is your first conference that you're going and this could be you're going to Vegas.  This could be you're going to the annual NCO conference or the esca conference or any of these conferences is,  really get an idea of what is going to happen so do a plan of the obviously the plan of the.  Conference facilities where the where the training is going to be who's going to be training and and have an organized I own our own organized list now some people go.    [7:34] When I get in this idea of like who's going the ESOP conferences and I'm just going to leave out the ESOP professionals 444 now right because.  This is really not for them they always have their plan right but this is for those that are going as companies that are thinking about esops that that either.  Could be thinking they're going to go ahead and do some type of ESOP transaction over the next 12 months or a couple years so there on that one category of.  People that are looking to get information on I think collectively the best expression of this is an ESOP right for us,  Army that kind of thing so so they're the ESOP right for me kind of people the other category is some people that have already done an ESOP.    [8:16] And now you have some new people that so they've done a couple different ways they could have gotten they could have done that so they now have an ESOP company now these are companies that are in my in this category are going to be categories like.  Non leveraged esops where Maybe the owner contributed some stock to these up maybe real small level of stock,  and now they want their some of their people to start to get to understand he's up so there might be sending collectively some of their people human resource people maybe CFOs controllers,  maybe project managers different types of people in the company to expose them to esops.  And then the third category is a company that's already 100% ESOP maybe they're mature and they're going to get updated information they've got new people they want to they want to continually exposed.  To the ESOP processor to the or what a nice up company has to do.    [9:08] So one of the things that I would say is based on your work a category you are there's going to really be a.  A how much how what kind of questions do you ask based on each one of these different categories and so if we really think about this and go towards let's go backwards and say hey you're 100% ESOP company.  And the plan is that you would use want to get updated information and really helpful to go to these conferences because one of the main things that you're going to get and I think this is going to be,  true for each category is and this is one of the things I think is the most valuable part of information in a conference is getting real,  information from existing companies that have already done an ESOP transaction.    [9:56] Secondly getting real information from companies that might be in the middle of a transaction or close to closing a transaction.    [10:04] And and then for the benefit of those who haven't done it I think having those kind of conversations and these kind of things can happen by going if you're planning to go to some of these different.  Training areas where they're going to have a lecture on for an hour on some topic it's going to be helpful than to network with the same people,  but you're probably not going to see if you're going to an ESOP right for you topic then you're probably going to be in the midst of companies that are in the same place you are so maybe going to some some areas or places where.    [10:36] There's going to be more advanced topics like repurchase liability or,  some of the things that happen with DOL Department of Labor and basically how the plans work more advanced things about the plans and,  the,  the structure of divestiture and how that works with with come up with Employees leaving and coming and going a lot of these just enter just kind of general ones that are more I'd say it experience these up companies are going to go to my advice is to kind of connect if you're at that.  First stage or category that is just trying to find and get good experienced information from E people that have done it is find those people so this is still just kind of a the planning process not yet the questions that we should be asking.  And.  Of course going to these these training sessions that last about an hour I think they're important and they're going to expose you to a lot of different items now one of the planning sides I'd say to is if you're going as a group.    [11:35] Then maybe obviously divide and conquer so some people go to certain lectures and then come back and take the notes and sharing the notes as you go through it so that you can get an overall benefit of a lot of information.  As I had mentioned earlier this was really the impetus of my first very first episode because I think that the people that I talked to.  Had expressed a lot of like this is just overwhelming what about this what about that and I know what I noticed in the conversations I had with companies that are thinking about esops is that.  We're talking about things that really wouldn't even matter for the most part.    [12:15] Because we don't even know whether or not they're going to be a good candidate for an ESOP going forward right we don't even know for instance if,  they're going to they're going to be okay relative to 409 p with employees that they have and how the ESOP might be structured from a valuation perspective a financing perspective a cash flow perspective.  These are the building blocks of the feasibility work right those are the building blocks that help us get into some of the deeper waters and so.    [12:42] Keep that in mind,  and understand that the plan itself would be to categorize the information in the ESOP process and in first the first category of how do you put information that your give it you're getting from these these conferences,  put them in one or two categories the first is pre ESOP and the second is post ESOP so that you're not.    [13:06] Mixing everything in together and you're like I'm just so focused on the problem of.  You know all these people retiring at once or having a major do you know downturn and what happens with the Department of Labor and in like some of these these issues that.    [13:21] Obviously they matter but they don't always matter so much at the front end I know you can better deal with those when you have some context in terms of where they fit in the process so let's let's divide that up between pre ESOP issues and post post ESOP.    [13:37] Guys what's first lesson in poker never bet on the no leave emotion at the door that's right over today's lesson how to draw up the bluff.  That much money this early in the game I'm saying he's holding nothing better than a pair of face.  I'm game I will see you are 500 and I will raise you another 500 of my own.  Very handsome bed Josh but be careful we don't want to push you too high too fast and keep them on the leash Holly call call,  and I'll call I'll see you 500.    [14:35] As of 2000 cuz you're free to do what you like it's a lot of money.    [14:41] I'm staying in he's trying to buy his way out of his bluff.  Have a girl talk.    [15:04] 49 starts with the a savings pretty high.  Hahaha all right so this is a this is a scene where it's like a first lesson in poker and trying to buy out someone's Bluff,  it's a funny scene in Ocean's Eleven but the idea is that you he's trying to help people to get prepared to play poker,  and I'm helping you I'm hopefully helping you to get prepared to go to Vegas or any other ESOP conference,  and ask the right questions to make sure in a sense to really kind of know who you're working with or who you might want to work with on an ESOP transaction of course,  because I'm categorically in that category of people that are thinking they want to do an ESOP so that is an ESOP right for them,  so a lot of the questions as we go into the next part of this is just going to be.  Helping you ask the right questions for that type of category so there might of course be other maturity sub companies asking other questions but we're going to focus on this in private and primarily we are a journey to an ESOP.  Podcast which means we're primarily targeting people that are thinking about going to a nice up so that's where we're going to try to focus a little bit.    [16:15] The first thing and I've learned this in conferences is that people get so confused about.  Gosh I met every all these kind of people they all seem so smart and there's attorneys and there's trustees and there's third party administrators there's valuation people.  There's Bankers there's there's attorneys that just do litigation work there's attorneys that do just transaction work there's attorneys that do both work for the trustee and also work for the company.  First off the first question is who does what and ask that question as you start thinking about who you're talking to,  and maybe it's just hey you know I understand that this is what you're teaching or this is what we're talking about give me a sense for in the in what I call the ESOP process where do you fit into the ESOP process what role do you play,  and the key of this is that not everybody can do everything.    [17:11] Because in the department of Labour process agreement there are Independence rules at certain people do this on the sell side,  our professionals do these types of activities and other people do by side activities and there's and there's going to be a stack up of one side sell side and one side versus the by side,  and So within those areas,  in an ESOP transaction process who is doing what and how do you work through those those questions so that's the first question I have when you when you talk to whoever you're going to talk to me and going to the conference and I have had experience with this,  in dealing with people that.    [17:50] You know that I start talking to at a conference that are like hey I'm so lost like what is what's going on so I would go to like a board of the sponsors and the people that put a lot of money into the conferences.  And that's it hey these people do this these people do that and this is this kind of a way I would do it now.  One thing that I will say is that just because a company sponsors and puts a lot of money in the conference.  Um does it mean that they're the right advisor for you.  Just it's your choice and I part of what I'm trying to help you do is in a conference not only get the right information you need to walk away with to make a good decision about how you're going to go forward on your Esau,  but but the other part is to make sure that you you know who these companies are and so just and again I just want to make the point just because they put a lot of money into the to the conference.    [18:41] It's going to mean a couple things for you number one they probably have a lot of money that they make any sub transactions doesn't mean they're not qualified but it does mean that they're putting and reinvesting a lot of money in the marketing side,  for esops,  and because of that they're going to have you're probably gonna have a lot more exposure to them from the speaking standpoint so you're going to buy hear more from them so you might be asking questions,  of the people that run the conference who else in the marketplace other than these,  people they're sponsoring it do should I talk to that would be a great question the reason I say that to you is because.    [19:18] I know that for people like me and other companies that do ESOP work a lot of us don't do a lot of heavy sponsorships,  we are very cost-conscious when it comes to how the ESOP transaction is put together,  and because of that we're not going to put a ton of money in these conferences and the conference is are benefiting you as the as the attendees right and they're geared towards that for sure but the same time they're also geared towards the organization,  and making sure the organization has the funding they need to support the administrative positions of the president of the  staff people and most of these I'm sure most of these are nonprofit come from you know entities right so and I'm not saying anything negative about them I'm just kind of giving you the lay of the land why to ask the question because I think you can easily get misguided because,  there's a lot of information that you're going to be asking these types of entities that may not give you the whole picture and think so we'll get into that when in a second but.    [20:20] What is to the next question I have is it relates to it is.  You know what I'm not getting into some of the some of the things that you're probably going to want to think about but I want to kind of get these first because I think they're really important how much does an ESOP cost.    [20:35] And how bye-bye when I think about the ESOP transaction itself how much does that cost.  And how much should I be thinking about in terms of budgeting but then the other side because you're going to get some a lot of different numbers there just to be honest with you there's going to be a lot of,  information and I think this is one of the most important questions when you go to a conference to actually ask.  And I think sometimes people feel a little bit embarrassed to ask the question some people don't but some people really do feel maybe embarrassed like.  They first they go in and they are so intimidated by all these ESOP professionals that are pontificating about how much they know about Aesop's right and I'm being a little sarcastic and I apologize if I'm offending anybody.    [21:17] But breaking it all down that you have every right to ask and understand the cost structure of what you're going to get into.  It's not everything and I know some people will say this and I think it sounds really really good on the front side.  Well you get what you pay for you know you get that in a nice car and a nice house or whatever but when you get down to the ESOP world that's not true.    [21:40] And I say that of course there are people that are doing ESOP work there maybe not qualify to do it and maybe don't charge as much as some other people but in general.  The the variety of cost structures for Aesop's not just by advisor and type of advisor but also by,  geographic region is completely all over the place and that's just me being a podcaster for three years and doing all kinds of transactions with a lot of different people and talking a ton a ton of people doing interviews with a lot of different people,  and asking those questions as if I were the ESOP company or the company trying to go to ESOP so I'm going to tell you there's gonna be a lot of variety in that that thing that's get said hey you get what you pay for is absolutely not true in Aesop's,  now there's a there's a truth level to it but when you get down to the deeper part of it there are absolutely highly qualified people doing ESOP transactions.  That will be way lower in price than others and it's no different the product at the end of the day is no,  and one of the one of the aspects of this that it's important to think about is that an ESOP transaction although it looks and feels like an m&a transaction a merger and acquisition trang's transaction.    [22:51] It is a regulated transaction which means the buyer can only pay fair market value for adequate consideration for the purchase of the business.  So it's on an investment banking standpoint,  that that whole thing of hey I want to pitch your company to these buyers and get the most money that doesn't really work for Aesop's and they also want to make you think the financing is very difficult to find I'm going to tell you right now it's not,  and a lot of the banks will be super helpful in the process also at the front end as well as its structuring modeling at talking about the finance part of it as well so I know that that is is absolutely true so,  asking the right questions is important when you're going into conference making sure you know who who you're talking to and what role they play.    [23:39] Now as you get through some of those I want to make sure we get into some concrete questions as well that that are not,  understanding how your transaction works or who's doing what or the cost of that but I also want to get into this idea of just a basic knowledge so as you come you might be a person or persons in a group of from a company that,  r  thinking that I don't know anything about Aesop's so let's just start with some Basics what is an ESOP you know go in ask that question what is an ESOP and you're going to get a lot of different questions it's not that complicated it is a trust,  that has the ability to own privately held shares and that trust has the has the ability to benefit employees based on a qualified.  But but what is an ESOP is a good question overall just take a ton of notes on that and really get to understand that better.    [24:30] The other thing is how long does it take to do in a transaction understand that the.  All the different steps when we go through this kind of question with it with a company that's think about ESOP I just go through step one through 10 I've everything compartmentalized and I have everything,  in that process that is structured in order to support each of the steps that we go through.  And the way that the model should work the way that the process should work although it might take six months three months four months maybe more maybe less when you get that answer the idea is not just how long does it take,  what do you do first and why do you do it and then what do you do next and what do you do ask those kind of questions and really get hopefully some solid answers,  and then what I do with with companies as I go through that conversation is I will walk them out on the cost,  step by step to make sure that we are thinking about,  should I you know as as I engage other advisors or it look at this.  Question do I go forward on esops what I want to do is I want to make sure that as a as a business owner or a management team I'm not moving through the ESOP process,  in and to quickly and paying all this money and not really benefiting that much so.  So that part of it is how the ESOP transaction model works and again we're just focusing on the transaction site with these questions.    [25:57] So as we get through that we're going to have definitely one question that has to get it get asked and it's conceptual at this point but it doesn't it needs to be laid out very specifically.  In the deeper analysis which is how we talk all kinds of call kinds of ways about esops how does it out of the tax benefits work what are the tax benefits of an ESOP.    [26:19] How do they work how do they affect the owner how do they affect the corporation how do they affect the employees and ultimately.  We're going to we're going to get a lot of information there and those whatever the information is whether it be hey the tax benefits of a selling shareholder is a 1042 where I can defer the capital gains,  of my ESOP transaction by using a qualified replacement property whether that's the answer and that's this sell-side tax,  or my Corporation is an s-corporation and I can I can utilize that as a tax-exempt company or a c-corporation and that can take the advantages of contributing and deducting my total,  ESOP my comp my company,  deduction from the actual taxes the company Pace I'm going to preferential Advantage there how does it affect the employees from what how they receive the shares and when they actually going to get paid out.  With it whatever those things are very important to so ask questions about the taxes that's going to be a major aspect of it.    [27:23] One other question that I think is important and its needs to be thought through a little bit but it also gets proven out and whoever you use as an ESOP advisor and that's how much of my shares should I sell.  Should I consider doing an ESOP transaction that's more of a non leveraged transaction and that I'm going to contribute those shares initially and then start building a stage transaction over a period of time,  should I do 100% ESOP and wear and everything in between that so be thinking about that in terms of the best possible structure and why you're going to work through all of those different scenarios because sometimes it's not completely clear,  as to what you're actually going to how you're actually going to transact in terms of the percentage.    [28:11] How is financing work so in from an ESOP transaction from the very beginning some if you haven't been experienced to this side of things how does it work in terms of regular senior do senior debt financing.  The seller financing how does how does the seller get their cash is kind of the at the root of this question.  What is the what's the potential liquidity event if you're doing just senior debt.  What it how does it work with a very complicated complicated financing structure where you have a capital stack of Mezzanine Financing.  Multiple parties in banking and as opposed to you're trying to really drive a higher liquidity event versus a just a normal,  very very simple model is hey we just do 100% seller note so how does the financing work what should I expect,  out of that question are going to be other questions that are going to be interesting to talk through which is how should I use if I want to use a management incentive plan,  how should I structure that for Mikey people maybe I want to use something like a sar program of stock appreciation rights program,  how does that work what should I be doing in combination of my existing management incentive plan,  bonus structures things like that so that you're anticipating what the company really does need to keep those key people in place,  on the other side when you think about the financing we also start thinking about.    [29:32] How to warrants work in a seller note transaction where I'm going to either Leverage The warrants for the increase in,  potential compensation on the Salerno,  in combination with the interest rate and so how do the warrants work how does that all play a role in in the cache at the in the compensation that the selling shareholders are going to get.  Going out into the future so the other thing the other part of it is that the other thing I'm sorry is as we think about.  What situations the are ideal for an ESOP so sometimes one of the things that I see in conferences is you know this idea of what's a prime candidate for an ESOP I think that's important but at the same time,  keep in mind that there's a lot of variance in ESOP structure and its I try to steer away from giving anybody any black and white.  You know things like this works in this doesn't work you know especially with the one question about hey I'm I too small to be an ESOP which I think is a good question for people.  In answering that question am I too small to be a nice.  And there are there are ways to do a small company ESOP that work and I can go into a lot of specifics there,  to help people if you have questions about that just go to journey to a nice app.com and shoot me an email but smallness in a sense there's there's payroll issues when it comes to the small companies.    [31:00] With an S corp he's up that are definitely difficult,  then there's cost prohibited as well if the company is so small and the cash flow is so small that might be problematic but just keep in mind that those things are there are things that I am experienced at looking at that,  may make the sap actually feasible in terms of modeling now I have gone to conferences where,  where are some of the companies some of the advisers have told people hey you know you're too small you this is what it costs it's going to cost you you know a half a million dollars and you come back and you look at what they're telling them and that's because the investment banking firms are charging so much money,  on success fees in financing fees,  so if the truth is is that that cost is so important that's why I let off with it because I think it's important to really understand,  what what the true costs of Aesop's are but,  kind of keeping that in mind obviously couldn't you be too large a Mite and can I be too large of a company to be an ESOP and I'd say generally the answer there is going to be no,  but talk about that and talk about you the way your company is structured and ask questions around those one question that needs to be asked and I think it's really good question so I saved it kind of towards the end here says.  What what's the process of working through if I'm the owner and I qualify the business.    [32:24] In terms of the licenses that we need as a business to conduct business in my Marketplace what happens if I sell my stock.    [32:33] In terms of those licenses and how the company moves forward,  and there are ways to dig into that question that are much deeper and in fact we've done podcast episodes around that like within the healthcare space and different things like that so it's a great question though for companies that have a licensing issue,  that they need to make sure they nail down a very very clearly in kind of in keeping what that there's also some questions I think are really helpful to ask,  in your Geographic presence so what happens if.  I have to qualify in a bit in a certain state to do business and so part of that is my Licensing in that state how does that transfer when you sell your stock of your company so I think those are very helpful.    [33:17] One thing I love to talk about I think and ask questions about is the area of the employees the benefiting and so is this truly going to make a difference in my employees life.  How does this really work,  terms of how the employees do benefit and really just in general taking an ESOP from not just the third party administrator,  economic benefits which is getting their shares over a period of time being qualified retirement plan and having a being kind of titled this beneficial owner.  But also the cultural aspects like how does the culture of an ESOP company work.  What's what's the you know one of the magic formula is there it to make that really move a company up another notch in terms of success.  And in terms of.  Strengthen and retention and the idea of motivating people with an ESOP how does that all work I think those are excellent questions to ask.    [34:17] One thing too is we think about where we are economically with interest rates Rising.  I might be asking questions right now about hey how did the interest rate in our current market affect esops,  in general and how does it affect their valuations how does it affect the deal structure how does it affect the potential for other economic.  Events like potentially moving us into recessionary time so so in that question a sub question is going to be how does the ESOP work through how the ESOP company after the transaction,  work through potential downturn issues so,  if I'm the selling shareholder say for instance in this hypothetical scenario and I got like you know 20 million dollars of seller financing,  and I can't even touch that until I get the bank paid off.    [35:09] How do I feel about the way this whole thing might go with a downturn and so some of that I would answered I don't want to,  answer all the questions that I'm kind of putting out to you but some of it I would say digging into your planning and your advisor how you guys work through that is going to be a critical element of that,  but I want to kind of,  throw that out because you might want to ask questions about hey how do you how do you then analyze the potential risk of a downturn how does it work to stress test someone's cash flows and get into some of the nitty-gritty,  on all of that to make sure that that you feel like,  planning correctly at the front end to make sure that that would work for for you the company and everything moving forward.    [35:49] One question I get from all kinds of people sometimes is they hate how does this deal is this esab deal compared to the potential strategic buyer,  in out what should I do and I compare this and I'll work through all the analysis for an ESOP and I want to work the analysis of a strategic buyer what are the pros and cons of those types of things I think that's a great question,  and I think that the a lot of people that have been exposed to that question are going to talk about the benefits and the tenants of being an ESOP company versus.  Strategic sale.  And so you're going to get into the some of the apples and oranges things that don't super compare because I think the mindset of companies going towards ESOP have something different than just I want the largest multiple I can.  Great question ask it for sure.  And one of the questions I want to leave you with is just you know again I'm saying all these things and keep in mind that there's a lot of things to ask that I'm not going to ask you I'm not going to put on this podcast,  at this point but this just gives you your hopefully your mind and get you oriented towards that as you go towards the conference but what I'm going to say is.    [36:56] You you want to kind of ask the question about risk right what's the risk of me selling my selling my company as an ESOP company what's the ongoing risk let's just say that I had an advisor hypothetically that.  Talk me into selling my company at a higher level valuation that was actually true and then the Department of Labor comes in,  and deals with that what's the risk to me as a selling shareholder from a fiduciary standpoint,  what's the risk to my advisor who sold me on that what's the risk to my trusty the attorneys the valuation firm and that's a really good question because.  What you need to know in the answer is where what what happens really in these types of situations when the Department of Labor shows up.  And they are asking questions where is your where's your sell-side advisor at that point in time and what's their level of risk in the event that this thing actually becomes a legal problem.  And.  Then the whole question of protecting you from a legal issue from a fiduciary standpoint I think that should be asked as well so those are all very good fundamental things to be thinking about as we think about the the close down of this podcast but I wanted to kind of keep those in your.    [38:12] Music.    [38:58] I absolutely love this scene this is the close of the scene and I want to use it to for the conclusion on this podcast because.  It's like this place that again I said this at the beginning I mean we're kind of turning in criminals into these Heroes but that's.  Now I've got a whole bunch of things I think about that but just in the in general the mode the mood of the scene is really really super cool.  In that you have all these people that have just pulled off this incredible Heist right they stole all this money and they're getting away with it right and they all show up at the fountain in Vegas and,  they as the Clair de Lune plays which is as beautiful song.  It first off this this whole scene makes me think of the this Brotherhood of people that have come together in the strong.    [39:53] Dynamic team and this is very very to me on a good ESOP deal this is what it feels like right is you.  Is you come together as a team of people of experts you know and everybody has their own level of expertise so you think about the ESOP transaction you've got.  You know that a good sale side advisor with a really good ESOP attorney and a really good trustee who gets it in and of course a great valuation firm on their side and their own attorney,  you have your Banker coming in with a great team and and because it the ESOP transaction as you get closer and closer to the closing of it.    [40:30] It takes on this this this.    [40:34] Thing that there's a there's a deep sense and this is why I think most people that do ESOP work will get what I'm saying there's a deep sense of gratification.  Pulling together and coming up with all the things that had to be done to get to where we are and so.    [40:49] There's this Fellowship of that happens and at the end of this scene people just start to say alright we did this.  And then they quietly just start walking away it's just this beautiful thing and of course matching that declare loon is just beautiful and I,  I haven't ever experienced like the specifics of doing this as an ESOP team but I would love to you know but I think it Paints the picture.  And the reason I wanted to kind of end with this is because if your ESOP transaction,  goes this smoothly at the end you're going to feel like you had such a great team representing you and even on both sides where you're represented as a selling shareholder,  by yourself side advisory team and also having a good trustee and the other side of their team doing the right things,  so that in this is why I think that the beauty of this of this scene really resonates for a nice up transaction because the water fountain and the music and the and the Brotherhood the fellowship that was experience,  all creates this wonderful sense of win-win and if you and if I tie this back to the movie you know what happens really is they don't not only get this figured out but they get us whole relationship love life thing figured out with his with his,  wife and their friendship and all these different things come together at the end and that's note that's what an ESOP transactions all about is having all those wins kind of converge together and then everybody that walks away until the next ESOP project so.    [42:16] Last couple of thoughts on that as I close is one of the main questions that I would say you want to think about ask is hey what happens in the event that I do an ESOP transaction.  And say it's a partially sup.  And the company or its 100% ESOP and the company wants to sell down the road I think that's a very good question to ask people first off how does it work it's absolutely going to happen is happen a lot but how does it work in terms of who's got to do what,  how does the trustee get involved how does the board of directors,  deal with it and so there's there's going to be out of that question there's going to be how the company is governed in terms of a controlling non-controlling ESOP in terms of the role of the trustee and the role of the participant employee ESOP holders so,  all of those are great things like I said I probably could ask a million more questions but these are the ones that really just stick out in my mind that I think are helpful as you go into a an ESOP conference so that you can get the most out of it,  so with all that I really appreciate you listening today if you know somebody that's doing an ESOP and you think it might be helpful please share this with them,  and with all that enjoy the conference has wherever you go and we'll see you on our next step on this journey duties.

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About Journey to an ESOP & Beyond

ESOPs are gaining traction. In the "Journey to an ESOP & Beyond” podcast, Phillip Hayes explains the process of the ESOP transaction and addresses ESOPs from a business owner’s perspective. The "ESOP Guy" illuminates the simplicity of ESOPs as he debunks common misconceptions that ESOPs are immensely costly and complicated.

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