Summary of Pdf on The Origin and History of the ESOP and Its Future Role as a Business Succession Tool

Grid Insight

ESOP Flexibility When Banks Lend 3x EBITDA

Quick Summary

John D. Menke and Dickson C. Buxton, writing in the May 2010 Journal of Financial Service Professionals, trace the ESOP from Louis Kelso's 1956 Peninsula Newspapers buyout to about 10 million employee owners. They describe bank buyout loans near 3 times EBITDA and an ESOP sale in increments that lets the owner keep control and repay a seller note with pretax dollars, including a Section 1042 deferral for qualifying C corporation sellers.

Who Benefits From This Most

Owners weighing an ESOP against a competitor or private equity sale can plan a staged sale that keeps control, with Section 1042 deferral for C corporations and seller-note rates. Advisors get the 1956 Peninsula Newspapers buyout, ERISA in 1974, and the 1996 S corporation change.

Intent: Overview
Exit Relevance: ESOP