Jul 2026

Meet Zolid AI

Here to help — Zolid AI can answer questions and provide insights. Free for now, with fair usage limits.

Your conversations are not shared with others. We may review them to improve Zolid AI.

Zolid AI may provide inaccurate info, so verify responses.

Summary of Podcast on EP33 - The Longest Yard - Quarterback for your ESOP - what should you know about this important role? - The Grid Wiki

EP33 - The Longest Yard - Quarterback for your ESOP - what should you know about this important role?

Journey to an ESOP & Beyond

Podcast

| December 1, 2022

Listen to episode Edit

Grid Insight

Quick Summary

Be the first to curate this episode — add a title and quick summary.

Add title and summary

Who Benefits From This Most

No information listed yet. Be the first to add who benefits from this content.

Suggest who benefits

Ask Zolid AI

When should a business owner start succession planning?What advice do business owners who sold to third parties have to offer me?Will all of my employees become owners if I sell the business to them?

Episode

Detailed Summary

No detailed summary yet. Suggest a summary to help the community.

Suggest summary

Answers

No questions listed yet. Be the first to add a question for this topic.

Suggest question

Authors

No authors for this episode.

Add author

Mentions

No mentions for this episode.

Add mention

Original Description

This episode focuses on better understanding the role of a “quarterback” in an ESOP transaction on your journey to ESOP. I often talk to folks about the complexities of an ESOP transaction and one point of discussion is what is the sell-side advisor’s role. This topic will help solidify in your mind what questions you might ask and be aware of when hiring one of the most important advisors in the ESOP transaction - your Quarterback!

Transcript

Transcript provided by the publisher.

Show

Bounce it.  58  that one hurt my marble sack.  That one hurt my mom will sag all right so alright the first scene that we let off with the beginning in The Longest Yard.  Episode to talk about ESOP quarterbacks is when Burt Reynolds was the quarterback playing a character called Paul Crewe.    [0:58] He ends up throwing the football right at the guard in.    [1:05] What we all would say is the marble sack which ouch hurts so bad and then the new version in  the 2005 version of The Longest Yard makes me wonder if they're going to come up with another one because this kind of repeats but now we have Adam Sandler instead of Burt Reynolds which is really funny right because.  Here Comes Happy Gilmore becoming quarterback for the longest yard.    [1:26] Anyway so instead of the Guard he ends up hitting the ref and the ref goes down in order to make this football game between the prisoners and the guards balance out so.  All that being said that the story of this and the connecting.  If you will allow me to connect it for you is that as a quarterback you're making very critical decisions and.  Quarterback in a football game course is a very key player to make sure that the game for the for your team goes correctly and that's exactly what a quarterback for an ESOP is going to do.  Now let's just start off with a couple things that I think are good are going to be important for us that are more reminders of,  some of the key objectives and the advantages of being an ESOP because I think those are going to be at the Forefront of your mind when you're thinking of who you're choosing as your quarterback.    [2:21] The first is that the company itself is going to experience because it's an ESOP a couple things that are really important first of first is the tax,  benefit of being an ESOP now they're going to be.  Two different components of tax benefits and the reason I bring this up and relationship to the quarterback is they need to be conscious of these things and they need to be specifically broken out in the very beginning planning stages where where you do,  a some type of valuation model and then the feasibility model in order for you to understand the benefits of being an ESOP and so.    [3:02] And really understand quantifying those benefits is going to be key so you have as a sell side advisor quarterback the the.  Responsibility to make sure that you've targeted the things that are most appropriate and one of them is going to be are we going to use the 1042 for the sell-side for the selling shareholders and I have to be a c-corp in order to do that,  and if I do that I get as the benefit to the selling shareholder we get to have a deferral.  On the capital gains tax for the transaction using a like-kind exchange qualified replacement property so that that needs to be identified by the quarterback and needs to be thought through the beginning of the transaction whether how that's going to be used.    [3:47] Now the other side of that is is I'm an s-corporation in the tax benefits of an S corporation or that I'm going to be a tax-exempt entity up to the percentage of the ESOP owns.  And so now in the Playbook here what I would say is that that.  There are some people that try to merge these and do an S corp to get the exemption but flip it to a CD to get the 10:42 and flip it right back to an S immediately.  If that's being presented to you really ask a lot of questions get your advisors and I'm not really going to dig I did a podcast on that,  you know a little while ago that's going to be something I would say as a benefit be careful usually when we're going in or either we either take the 10:42 and we're a c-corp.  And if we're going to convert an S2 a see to do that we're going to be 5 years as an escort,  if we go if we're going to be a c-corp already we can take the 10:42 and then elect the selection and then of course have both Best of Both Worlds and so.  So benefits are important control understanding the control of the company afterwards is going to be a benefit so how how you retain control as a selling shareholder or be something that quarterback is going to have to advise you on.  They support of the company's sustainable ESOP needs to be worked through by the quarterback to make sure that.    [5:10] The company has really been reasonable about the not just the forecast,  but the debt structure as well and the way that that's put together so the quarterback needs to be thinking about the sustainability of the ESOP,  going into it and so now that's going to lead to other benefits of being an ESOP right so the benefits of there are like we are going to be statistically,  more productive as a company we're going to be statistically stronger when our work fate force in terms of retention and motivation of people.  We're going to have over time because we're not paying taxes we're going to have more liquidity more cash to the company's going to have so from a business standpoint there's going to be advantages that the quarterback is going to lead to from a cell shell side.  Advisor to the selling shareholders there's also going to be opportunities for liquidity as well that are going to be built in all those are as we start off the the podcast are things that we need to be thinking about.  That need to be nailed down,  on a bigger picture level in terms of the way that the quarterback is planning and I just kind of like make this the metaphor would be here here's our Playbook right here's the quarterbacks Playbook and how we're going to go through the plays of the ESOP transaction,  so keeping that in mind that the next thing I want to talk about and again the idea behind what is a court why do you even need a quarterback.    [6:28] Well keep in mind something I've said before is that it's so confusing so maybe.  Crazy confusing for people when they go to a conference and they have 15 million different people and being crazy right here but they have a lot of people that do a lot of different things so let's name off some of the people that you're going to possibly encounter,  in the ESOP transaction.    [6:54] Now you have yourself okay so that's the selling shareholders and in addition to that you might have the overlap of those in the board of directors,  you might also have a company management or key key management So within the company you're going to have two or three or,  um roles of people and that's easy to understanding and keep in to kind of check.    [7:17] And one of the things we'll do at the each of these is we're going to categorize them into three groups as we go through this so we're still going through what I would say is the sell side team,  the sell-side team is going to be the selling shareholders,  the company's management the quarterback will be part of the the cell site team or where we refer to them as the sell-side advisor.  You're going to also have a a nice ah Peter attorney that works for the company specifically.  So then you're going to have in addition to that you're going to have the wealth advisor now the wealth advisor is part part of the 10:42 team,  but that could break itself into categorically the you might have a wealth advisor that's,  part of your normal as a selling shareholder your normal team that helps you with your Investments,  that works in coordinates with the 10:42 Wealth Advisors as well as part of a major  um company that does 1042 work so so the major investment groups are normally the ones that have an ESOP team that you're going to be looking at.  Now in addition to that they're going to say they're going to be part of wrapping up the once the ESOP is done so they're not going to be as deep in the transaction side but they will be when the deals wrapped up.    [8:40] Part of the sell-side to is going to be your CPA firm and so the role that that your CPA firms going to play from a tax,  consultancy standpoint in relationship to your quarterback now.    [8:52] If your quarterback is an investment banking firm then they're definitely going to lean heavily on your CPA firm to make sure that they do they do that and here's the problem,  that I see with Investment Banking firms that don't have a lot of tax background and  the one CPA firms that do ESOP transactions like ours do they do have a CPA partner tax partner that's working to do tax planning so they'll come alongside the  existing CPA firm not to replace what they're doing but to augment what they're doing to provide additional counsel to make sure that the,  the tax transaction is done accordingly whether there's going to be a contribution used in the ESOP.  To reduce ordinary income tax and how that's going to really play out whether how what your AAA is from an accumulated adjustment account standpoint for an s-corporation Esau.  Those are all going to be important elements of what the CPA firms going to provide and so.  That's going to be important where you get them involved and so the quarterback is going to want to make sure that they're involved the right time,  and the whole process so everything's like I said A playbook where the quarterbacks bring people in and out of each of these steps and important I think there are some quarterbacks that are not sell side advisors to by the way.  So I don't want to be too remiss and just saying you have to be this this or this but for the most part they're normally going to be the sell-side advisor.    [10:21] So now you have you also have in addition to the,  legal counsel for the company for for ether for the ESOP specifically there are cases where we have the selling shareholders legal counsel involved,  writing up documents for say for instance the structure of the entity if we're going to transition real estate they're going to be reviewing the documents as well for the selling shareholder so that's going to be a part of the,  the role that we're going to see within this whole this whole Kaleidoscope of different people doing different things now we're going to have in the.  The buy side of the transaction you're going to have of course your ESOP transaction trustee which will eventually become your ESOP ongoing trustee so the quarterbacks role is to is to Source in really work through the transaction trustees going to be,  and then that trustee because of the DOL process agreement is going to need to go and have an independent valuation firm that will be part of their financial advisory team to support the transaction for the trustee.  Now these two roles interestingly enough are going to be one the two roles the main two roles that are going to continue in the future for the most part,  you're normally going to hire the the transaction trustee to be the ongoing trustee and then you're normally going to hire the valuation firm that is the financial advisor to the trustee to do the annual value business valuation so.    [11:47] Really important that the quarterback Keys you in on that.  Part of the process to make sure that they that you really want to work with these people you don't have to work with them on going but it makes more sense cost wise for you to do that so so that's going to be a really important element of how the quarterback,  Works them into the process now  finally you're going to have in a well not finally but there's a couple more as you think about the grouping so we have the sell side which we talked about we have the by side which is going to include the ESOP trustee the valuation firm and then their attorney as well so the the,  Financial the legal adviser to the attorney now is going to be an ESOP attorney that supports the trustee in all of the steps of the negotiation and the documents to make sure that,  been reviewed from from that level.    [12:39] Now we're going to go into as part of the rolls is the third party administrator so the quarterbacks also bringing in the third party administrator at the appropriate time now.  I bring the third-party administrator in usually a very up front to make sure that I've checked the things that I want to check off when we talk about.  A benefit analysis study the 40 for the 25% limits the 49p the issues related to 415 so I want to use them I want to have them involved,  at the beginning and also really right before the end before all the documents are getting put together so from a,  quarterback standpoint I'm bringing them in early and I'm bringing in them right before to make sure that we've got all of our ducks in a row,  from that standpoint now they're going to have an ongoing relationship with the company as well,  as time goes on so so that's going to be important for the quarterback to make sure that they've,  we've done the work to create not only a good transaction.  You know if we think about the Playbook concept is getting through one play after another to get to the end zone but also,  the the not just the actual the whole game of the transaction but also the winning season that you're going to want to go into the future and so some of that is going to incorporate building relationships with some of these.    [14:00] Key areas or key people and institutions that are going to go in and become a very important part of the structure,  of the company when we talked about the ongoing relationships and and the council the advice,  the the services that are going to be needed now another quarterback service that doesn't get talked about a lot in other people's presentations because.    [14:25] To be honest with you I think the ESOP industry is great but I think sometimes it's it's very myopic like it's very so focused on the transaction and not the bigger picture.  So if we take a step back a second and realize that we're dealing with people.  The selling shareholder the key management there we're just all people write all these people have just named off or just people.    [14:49] I don't want to be too like simplistic your but I do think it's important to understand that that we are not just building a transaction we're also building a sustainable ESOP company,  into the future,  and because they're just people they're going to have you're going to have people at the end of the day that are part of the transaction and then you're going to have people in your company that are going to be part of the ongoing company which is probably going to be everybody to be honest with you.    [15:17] The company needs to consider the culture what they're doing culturally.  And when I think about being a quarterback with specific roles one of the aspects of this is how do we how do we bring somebody in as a consultant.  To help the company strengthen their culture and it could be the quarterback bringing in a,  culture consultant that does this weather they do this right at the beginning right at the end when the ESOP closes off or when the closing happens and you have the kickoff meeting,  or they help build that going forward we do what we do need to think about that as the quarterback how important that is as well,  now there are other ancillary type of services out there that are available,  that will help pull together the ESOP as well so so all of that from an ancillary standpoint needs to be in the thought process of the ESOP quarterback as we start thinking about that.  Now then we get into the actual transaction and then the other part of this whole thing is is the banking side so who is that who's the banking institution now how's the quarterback.  Normally deal with this part of it now first off the the main thing is that if you're if your transaction.    [16:35] That you're trying to accomplish.  Is going to include a liquidity event you're going to need senior debt you're going to need some type of financing so the quarterback in this case is going to be,  identifying early in the process who the banking institutions are going to be now sometimes this gets done at the end of the process.    [16:55] But I believe wholeheartedly from a quarterback standpoint that we're better off identifying this early in the process but.    [17:04] And the reason I say that is because the same thing that exists here is that we're going to have an ongoing relationship with this bank as a company going forward.  So you want to put your company your ESOP company in a good position to not only have a good transaction but also have a strong relationship going forward and and that takes time and if you're going to have.  Um if you have a company that has an existing banking relationship that frankly won't do the ESOP transaction because they're just not there,  they don't understand Aesop's might be that might be the problem they may only do deals with collateral and your deal is not going to have collateral so and you really want to have a liquidity event so.  In that case the quarterback is going to bring and Source financing for the transaction so that the selling shoulder shareholders have some type of liquidity,  so in that case that that quarterback really needs to be dialed in into with who they are and what process are we going to.  As we bring them in where are we going to win are we going to get the term sheet so that we really can go through that with the client to make sure that they are in agreement with the terms of the.    [18:16] How are those terms going to be negotiated how many banks are going to be included and what's the process of going from you know the bank financing town too,  term sheets down to selecting the bank and then getting them to do a commitment letter so that we're ready then from a commitment letter standpoint,  to as a quarterback to get them to on,  at on the same page with everybody else as we get into the closing part of the ESOP transaction so so you can see like we've just talked for the you know for several minutes maybe longer about all the different roles,  and to organize all of that there is there is a level of effort it takes to keep everybody on the same page and move through the ESOP process and this is this is why frankly I do an ESOP,  specific 10-step process that.    [19:07] I believe is on our website at journey to an ESOP.com that helps to kind of organize you know each of these roles but also respectively.  The activity that's happening within these each each of these roles so that there's there's super Clarity on the 10 steps in that everybody understands like what we're doing why were doing it and who we're going to do it with and that's,  a great job if the quarterbacks doing all that and you and you as you go through the process feel,  like all that's being like you know what's going to help come next one of the things that I like to do is quarterback.    [19:39] Not always but in some cases is just right out and very specific timeline and take every activity so I'll take my ten steps but then I'll break it down to a lot of other pieces because the ten steps doesn't include you know the.  Different things that we're going to do relative to planning it could be we're going to spend a little more time building a warrant model or we're going to spend one more time.  Dealing with the management incentive plan or that are the.  PowerPoint presentation which is the Sim we're going to do a lot of these things so in the timeline we're going to probably break all that out with dates and who's doing what,  I think that really helps as a quarterback to give the client something very specific to know what to expect.  Now the quarterback might come back because one question we're always going to get in this type of work is how much time is it going to take from beginning to end and I think a very average response to that which is to be honest with you I'll say the same thing it's about six months.    [20:36] What's really different is when your quarterback comes back and says alright and it's about six months but here's what we're going to do right this is the way the six-month is six months is going to get broken out.  Now why that's good is because it gets everybody in the sell-side team which is your cell your shareholders your key managers because everybody up to speed on what to,  how much of this is going to be a demand on them hey there they're still doing business normal right I mean it's like.  It's like you have this project going on in your house and you still got to live there.  So they're making It's A disruption to them I and so you want to know and in give good expectations as a quarterback to who's doing what and how what the what's going to be expected of them.    [21:18] Now if we think about this a little bit deeper and in terms of the quarterbacks role I think that it really is helpful to dig into some of the deeper aspects of the role itself because,  the value of a good quarterback as we saw in the longest yard is they're going to win games for you you know I think about why do we care so much in.  Football about who the quarterback is why are they so you know like that's the person you talk about right I mean you know it's.    [21:48] From all the all the football history you know we come back to the some of the famous quarterbacks and you're like wow these are these are the best of the best right.    [21:57] And the reason is because they do things that are very.  Specific that take a little bit more than just following after one if we have a Playbook right and you can only do like you're going to have a running play or a passing play,  you know obviously anybody can run that play right it's the quarterbacks Ingenuity and Innovation and there,  their creativity that makes the difference it's their split-second decision that says hey we need to go this way.  And a good quarterback in an ESOP transaction can can do that.  Now one of the things that they need to do in the very beginning in terms of building a relationship with their client and they need to really understand the motivations of the selling shareholders.  Now and sometimes we can kind of get through this and be like it's really kind of.    [22:46] Pretty basic I'm going to sell my company because I want to I want to give I want to give the employees a shot I want to have a legacy we can get kind of caught up with that,  um there are experientially things that I've seen within deals where you know the owners motivations are not super.  But as you get deeper into the process they start revealing hey really this is really what I want I started off with this but it really and sometimes the selling shareholders don't really know so good quarterbacks going to be able to navigate that pull out that type of information so that.    [23:18] That can be better understood because it's gonna matter when you get into the negotiations which is what the quarterbacks going to do they're going to go they're going to,  quarterback the negotiations between the sell side and the by side to make sure that the motivations have been met including Financial.  Also long-term like how the structure of the selling note seller notes are going to look like and how that could how that's going to work with the bank.  They're going to be managing expectations through the whole process with hopefully the continued,  understanding of what it what are the objectives of the selling shareholder or shareholders right and keeping those up front and bringing those back up in the whole process over overall.  The quarterbacks also going to provide.    [24:07] An incredible amount when I and I can't tell you how important this is but I think it's one of the most important things is an incredible amount of Education,  now that's where I would say having a quarterback that has a lot of experience.  And a lot of skill sets that overlap so I think for the most part ESOP experience obviously is really important they need to have a very strong valuation background.  They need to understand they need to have a very strong transaction background when it comes to putting deals together they need to understand they have a very good business background.  Because they're educating you not only on the process of doing the transaction but they're also educating you on what,  all of these types of things mean as they converge together to make sure that they're giving you as a quarterback the best advice in terms of how to prepare for this and how to walk through each of these steps.  In an optimal way,  so education is important not only that what education does for a selling shareholder and their team is it creates a confidence that this is ESOP trip is going in the right direction so one of the things the quarterback does frankly is their kind of the psychologist as well.  The kind of calming everybody down if you've been in transactions before they are stressful they can be stressful.  The quarterback needs to be able to work through that process know where they're going.    [25:29] Because they've been there before and continue to come back to the to the updates and the questions that the clients going to have to make sure that they're working through it and they're creating a peaceful harmonious type of situation.    [25:44] So obviously they're going to manage through the each of the steps of the transaction that we work through the quarterback's job if you've ever been in a closing and,  and like nobody's saying anything  everybody's waiting on somebody the quarterback is the one that needs to say it they need to organize the phone calls for closing they need to organize the checklist to make sure people are on top of it they need to proactively respond.  Not respond proactively Outreach to everybody to make sure that things are moving they need to set a closing date and they need to work towards that closing date.  With in my case like I get kind of very passionate about that and sometimes,  it may be like alright alright already we know we're going to close that day but if it's not being said over and over and over again I guarantee you when you get down to the closing table and you have,  you have the bank and their legal counsel you have the trustee their valuation firm and their legal counsel you have your own legal counsel you have other advisors involved in CPA firms all of those people we just talked about meeting on.  You know conference calls and zoom calls and teams calls your day everybody needs to know what they need to do and they need to be held accountable to it to get to closing.    [26:54] Quarterback needs to do that.    [26:56] They obviously big by doing that they're keeping everything moving forward and what this all does is it creates a hopefully for the selling shareholder.  Very smooth transaction where the things that they weren't surprised by anything that would be one of my greatest goals is being a quarterback is,  is as I want my client not to be surprised by anything I knew that was going to happen I knew how this was going to go because my quarterback told me this is probably what's going to happen and they're not always going to be a hundred percent right.    [27:27] Understanding the pitfalls as very important and that's part of the point of doing this podcast really is to help people understand what their expectation should be in the whole process.    [27:38] So putting it all together the quarterback recruits everybody together and they close the deal and then they need to be I think accountable for post ESOP questions so.  What happens when we have to do this now we're setting up a timeline post ESOP so I think the quarterbacks rule should also be,  you know like this is how the rollout meeting should go this is how where we need to kind of get the the TPA,  this is how we're going to update the valuation even for from the whole 12 months after the esops closed.  What should happen next I think that's going to be a forecasted future thing is very important for the quarterback to be,  um helping with so all of that is going to do a couple things as we started off with benefits of what an ESOP transaction can be an ESOP company.  As we think about selecting the right quarterback the benefits here are.    [28:30] A pretty clear they're going to build a transaction and an ongoing ESOP sustainable ESOP company with good relationships.  In order to create the least amount of uncertainty in the process.  Create a lot of confidence going into it for the selling shareholders and the management team and then then all of that what that's going to do from a benefit Sam point is create a very successful ESOP transaction and ultimately a very successful.  ESOP company so that and if this was a staged transaction so that the next transaction,  has a lot of good momentum and people believe in the concept so that everything else is done it creates what a good quarterback will do.  And a winning transaction is that unlike football.  It's going to be a win-win-win it's not a win-loss situation they're going to win for the selling shareholder they're going to win for the company they're going to win for the employees.    [29:30] And ultimately.  The win for the community and then there's going to be a win for the customers of that company ultimately everybody's going to win and and that's what what I think is the ultimate benefit of being an ESOP company is because there's there is a strong wind win-win proposition.  And I don't see that with other types of m&a transactions I do see that with esops,  so with all that I hope that was super helpful as you watch some football think about quarterbacks think about who you might want to use for your ESOP transaction if you have any questions go to our website at journey to a nice up.com you can always ping us with questions,  but from there I just wanted to wish you guys a very Merry Christmas a happy holiday and enjoy the rest of your year and,  look forward to our next step on this journey to a Nissan.

More from this show

EP1 - Warrants on an ESOP transaction with Will Rodriguez at Vision Point Capital

Podcast

EP21 - “Create Amazing” Interview with author Greg Graves, Retired, Chairman and CEO, Burns & McDonnell - ESOP company.

Podcast

EP22 - Before it Erupts - Kaboom! Working through business volatility

Podcast

Ep6 - Mt. Everest Part 1 - Revenue Planning

Podcast

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.

Curators(1)

People who have contributed edits to this page.

Jun 26

Zolid AI

+0/−0

View revision history