training and education for employee buyouts fifth european meeting of employee ownership brussels...
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TRAINING AND EDUCATIONFOR EMPLOYEE BUYOUTS
FIFTH EUROPEAN MEETING OF EMPLOYEE OWNERSHIP
Brussels 16, 17, 18 June 2005
European Federation of Employee Share Ownership
Dan Bell ([email protected])
OHIO EMPLOYEE OWNERSHIP CENTER
Kent State University
About the OEOC Since 1987
• Assisted: 485 companies, 93,000 employees
• Results: 71 firms employing 14,000
• Cost to Taxpayers: $250 per job
• http://dept.kent.edu/oeoc/
USES OF EMPLOYEE OWNERSHIP
• Owner Driven– Succession Planning– Competitiveness Strategy– Tax Advantaged Corporate Financing
• Employee Driven– Averting a Plant Shutdown
• http://dept.kent.edu/oeoc/BuyoutAssistance/WhenEOMakesSense.htm
Education for Seller: Why Employee Ownership
• Diversify Concentrated Wealth
• Flexible Multiple Year Transition Out
• Tax Savings vs Strategic Buyer Price
Education for Seller:How to Do the Deal
• Acceptable Valuation before Going Public
• Get Commitment (Vote) from Employees
• Involve Employees in Design
• Finding Experienced Professionals
• Grant Money if Job Loss Threatened
Education for Seller:Design Issues
• Administration Cost vs Tax Savings
• Potential Conflict of Interest as Trustee
• Repurchase Liability
• Employee Benefit vs Ownership Culture
Education for Buyers
• Steps In a Buyout
• Factors to Consider
• How ESOP or Cooperative Works
• Design & Structuring Issues
Education for Buyers: Steps in Doing a Buyout
• Education about the buyout
• Establish a buyout committee
• Preliminary feasibility assessment
• Business Plan
• Negotiate sales agreement with seller
• Arrange financing
• Close deal and CELEBRATE!
Education for Buyers: Key Factors to Consider
• Is the current owner willing to sell?• Do the employees want to buy?• Is there enough time for a buyout?• Is the plant competitive?• Is competent management available?• Is financing available?• Will labor-management relations hinder success?
Education for Buyers: How ESOPs Work
• How Does the ESOP Buy the Company?
• How Do I Get in the ESOP?
• How Do I Get Stock in My Account?
• How Do I Get My Money?
• What Rights Do I Have?– Voting– Information
How Do ESOPs Buy Stock?
ESOP
Company Original Owners
Employees
Bank
LOAN A
LOAN B PAYMENT
Stock
Employee Owners
How Do ESOPs Repay the Loan?
ESOP
Company
Employee Owners
Bank
Retirement Contribution
LOAN A Payment
LOAN B Payment
How Do I Get Stock in My Account?
Company
Retirement Contributions
Individual Accounts
How Do I Get Stock in My Account?
Suspense Account
(Holds Shares as Collateral on Unpaid Portion of ESOP Loan)
Individual Accounts
(Uses ESOP Allocation to Repay Loan and Receive Released Shares)
Education for Buyers: Design & Structuring Issues
• Wage Concession / Pension Rollover
• Shared Governance
• Individual vs Group Interests
• Future Employees – Also Owners?
• Equity Partners
OEOC Web Site Resources
• http://dept.kent.edu/oeoc/BuyoutAssistance/StepsinBuyout.htm
• http://dept.kent.edu/oeoc/BuyoutAssistance/PreliminaryFeasibility.htm
• http://dept.kent.edu/oeoc/BuyoutAssistance/KeyQuestions.htm
• http://dept.kent.edu/oeoc/commonwealthbrochure.pdf• http://dept.kent.edu/oeoc/BuyoutAssistance/
WhatIsESOP.htm• http://dept.kent.edu/oeoc/BuyoutAssistance/
CreatingAnOwnershipCulture.htm