RESOURCES

Labor Agreements

American Capital has been a pioneer in structuring collectively bargained stock-for-wage agreements that are fair to all parties in a transaction.

Stock ownership through an Employee Stock Ownership Plan can be an effective trade-off for taking wage and benefit cuts in a downturn because employees can gain the benefits of stock appreciation and dividends in an upturn. American Capital can conduct a financial analysis of the company to assist in determining the appropriate stock or profit-sharing structure for any given level of concession.

Northwest Airlines

The flight attendants at Northwest Airlines were faced with demands for concessions and the possibility of the airline going into bankruptcy. The International Brotherhood of Teamsters, who represented the flight attendants, engaged American Capital to assist in structuring an exchange of employee sacrifices from all Northwest Airlines employees for $886 million of preferred stock. This restructuring allowed Northwest to avert bankruptcy, regain profitability and go public, while providing employees with preferred stock having a value equivalent to their sacrifices, which they should be able to recoup over time.

For average employees, the chances of owning a home, affording a good education for their kids and their very livelihood are tied up in the success or failure of their company. Stable income and accruing pension benefits are the bulk of their financial resources.

When a change of control transaction is being contemplated, employees may wish to consider buying the company themselves. If the company can be purchased on the same terms as a competing LBO, the tax advantages of an employee buyout will enhance the viability of the company. In this way, if the company is successful due to workers' sacrifices or for any reason, the employees will automatically reap the benefits of success through ownership of the company.

A union supporting an employee buyout with concessions will generally demand voting pass-through rights and membership on the Board of Directors for their membership. Such Boards commonly will have one third of its directors representing the salaried employees, one third representing the bargaining unit and one third composed of independent directors or directors representing cash equity investors.

American Capital is experienced at developing equitable labor agreements for employee groups faced with very personal and significant financial considerations. Such assistance enables all parties to make decisions based on their best judgement of the financial costs and benefits to them and their families.