In 2018, Menke & Associates, Inc. assisted a unique, deeply relationship-driven service business with its successful transition to 100% employee ownership. The company’s two shareholders had built a $40 million-dollar entity with a worldwide, disparate supplier network, multiple Fortune 100 clients, and global operations in a heavily-regulated industry and were ready to continue their ownership and management succession plan through a sale to an Employee Stock Ownership Plan.
We designed and orchestrated an ESOP transaction that transitioned the firm to 100% employee ownership. Our approach accomplished the client’s three key goals:
#1 – ESOP implementation and transaction closing before the end of their 2018 fiscal year;
#2 – Structure the financing to sustainably deleverage the ESOP acquisition debt while enabling tax deferral treatment for the selling shareholders;
#3 – Attract and retain top talent in a fiercely competitive landscape through industry-leading benefits.
Our integrated plan administration and benefits consulting practice designed and finalized the ESOP structure and qualified plan documentation, while the financial transaction term sheet was negotiated amongst the company, the selling shareholders, and the ESOP’s independent fiduciary. Menke’s proprietary iterative financial modeling allowed us to provide an updated, accurate picture of the company under ESOP ownership throughout the process and gave the key decision-makers the confidence to efficiently and successfully negotiate the terms of the transaction with the ESOP’s independent fiduciary. Finally, the transaction design and modeling included the implementation of a performance-based phantom equity plan for C-level management with grants and payouts tied to the successful retirement of the company’s outside debt to retain and motivate key personnel.
About Menke:
We have helped over 3,500 companies successfully transition to employee ownership. Our holistic ESOP approach enables a positive outcome for the company, its employees and shareholders. We believe ownership is powerful.
