Baby Boomers Selling to ESOPs
November 6, 2007
Want to Buy a Business? Your Timing is Right expands on yesterday's post titled Why the Number of ESOPs is not Growing at a Faster Rate, discussing the following: "Expect a glut of firms to go up for sale as thousands of baby boomers retire"
"Most firms will sell to strangers"
"Owners without an exit strategy will likely sell at a discount"
"Expert advice is a must"
"One option that's growing more popular is selling to employees"
In yesterday's post I attempted to quantify the potential universe of baby boomers looking to exit the business. The article estimates that by 2009, "750,000 companies owned by boomers -- one in every six -- will be looking for buyers, up fifteen-fold from 2001." The article also specifically mentions ESOPs as an option: "One option that's growing more popular is selling to employees -- either a management buyout or employee stock ownership plan (ESOP). Both take time to set up but give owners the fulfillment that they're passing on their legacy…An ESOP tends to be a good route for firms with stable earnings and revenue. But the plan gets way too costly for small firms -- those under $1 million in yearly pre-tax profit -- due to associated upkeep costs like annual appraisals." | 
