Inside ICI
Business & Leadership Development Conference Highlight: Shawn Ely
Understanding ESOPs: Exploring Employee Stock Ownership Plans as an Option to Sell Your Business
at each stage. However, more than half of small to mid-size private companies fail to include exit planning as part of their future plans. Business exit planning should be recognized as an important investment in the future of any company and its long-term success. Unfortunately, without proper exit planning, business owners may not receive the outcome they were expecting. Shawn Ely, Cleveland, Ohio based Managing Director of Lazear Capital Partners explains, “for many business owners, succession or exit planning simply means selling to an independent, third-party, typically a Private Equity (“PE”) or a Strategic/Competitor buyer. However, an option many owners often overlook is the sale of the business to all of their employees via an Employee Stock Ownership Plan (“ESOP”), which business owners are learning can be a huge win for all stakeholders, including the seller, the employees, the community and long-time service-provider partners to the company.” An ESOP is an employee benefit plan that transitions
A
ownership to the employees (the employees do not invest a dime) while providing financial flexibility and significant tax advantages to both the seller AND the company.
Currently,
there are approximately 7,000 ESOP companies in the US and that number is rising as more business owners begin to recognize the benefits of an ESOPs over selling to a 3rd party. This was the case for Doug Kovatch, President of Kovatch Castings Inc. (in Uniontown, Ohio), who had initially looked into selling to a third party but ultimately chose an Employee Stock Ownership Plan. “I had looked into the possibility of third-party sale, but one of my board of advisers suggested I consider an ESOP,” he said. “The more I learned about it, the more an ESOP became sort of the clearest strategy to meet my goals.” Shawn Ely, who worked with Kovatch Castings Inc. to facilitate the ESOP transaction said, “a widespread impression or misconception about these deals is that ESOPs can’t generate “a fair market price.” The reality is that in many cases, the ESOP structure can offer the greatest net, after-tax return to the sellers, which is even more attractive when weighed alongside with some of the other perks, such as rewarding
14 ❘ March 2021 ®
ll businesses cycle through various stages of development and having a proper plan in place to adapt to future challenges and growth is key to succeeding
loyal employees, preserving the company’s culture and
legacy, retaining jobs in the community, all while the seller and existing management team maintain operational control of the business.” To learn more about ESOPs, join Shawn on Tuesday,
April 20th at the upcoming 2021 ICI Business and Leadership Development Conference, where he will lead an ESOP panel to explore exactly what an ESOP is, how they are formed, how they work and what makes a good ESOP candidate. As part of this discussion, he will compare and contrast an ESOP sale to other options available to sellers and examine some of the myths and misperceptions surrounding ESOPs. Finally, he will discuss valuation, control, financing and structuring issues associated with an ESOP transaction. The goal of this session is to provide attendees a solid understanding of the ESOP option and how it can be used in business succession and transitions.
About Shawn Ely Shawn Ely is a Managing Director with Lazear Capital
Partners, a Columbus-based, full-service Investment Bank with a unique niche in the Employee Stock Ownership Plan (ESOP) space. A Cleveland-area native and resident, Shawn leads the firm’s efforts in the Cleveland/NE Ohio market. Shawn has over 30 years of diverse experience in Investment Banking, Corporate Finance, Private Equity, Operations and Advisory experience at a variety of firms, including The Edgewater Funds (Chicago), Key Principal Partners/Cyprium, Carleton, McCreary, Holmes and Key Bank.
Shawn is also a
serial entrepreneur, having started and run several successful smaller enterprises early in his career. Shawn received his B.S. degree, cum laude, from the
undergraduate division of the Wharton School at the University of Pennsylvania where he was a member of the undefeated freshman football team. He received his M.B.A. degree, with honors, from the University of Chicago Booth School of Business. Shawn lives in Brecksville with his wife Kerry and three
active children, is an avid outdoorsman and enjoys golf, skiing, travel, and coaching and cheering on his children in their myriad activities.
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36
