RESOURCES

ESOP Financing

American Capital assists owners, managers, workers and unions in in evaluating, structuring, negotiating and financing employee buyouts and Employee Stock Ownership Plans (ESOPs).

We specialize in providing liquidity for owners of privately held corporations and facilitating buyouts of divisions and subsidiaries of public or private corporations. American Capital helps clients restructure a company's ownership and control, and provides the financing that makes the new structure possible. We are experts at using ESOP financing techniques and utilize a wide range of capital strategies to structure the most advantageous transaction possible.

ESOPs have proven extremely effective in a variety of corporate transactions. When management and other employees want to acquire their firm or bid against competing firms to buy it, a leveraged ESOP may reduce the cost of borrowing for the transaction by as much as 30 percent. Furthermore, the principal payments, as well as interest payments on such debt, can be made with pre-tax income. An ESOP makes it possible to exchange ownership for employee-related cost reductions. This combination of factors makes a management and employee buyout highly competitive compared to non-ESOP bids.

When an owner wants to liquidate closely held stock, existing management and other employees may be the ideal buyer. The tax advantages of an ESOP-financed transaction can provide the seller with more value than other alternatives. Most importantly, the seller can roll over the proceeds and defer all tax liabilities. Debt service will be lower if accomplished through an ESOP leveraged buyout.

American Capital's broad expertise in implementing employee ownership can be utilized to assist owners, managers and employees in assessing the viability of such transactions.