Webinar Slides: Is an ESOP Right for Your Company?
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Transcript of Webinar Slides: Is an ESOP Right for Your Company?
IS AN ESOP RIGHT FOR YOUR COMPANY? Presented by: Jeffrey Gluck, Cindy Dwyer, Hal Hunt
and Mark Welker
May 1, 2014
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To view this webinar in full screen mode, click on view options in the upper right hand corner.
Click the Support tab for technical assistance.
If you have a question during the presentation, please use the Q&A feature at the bottom of your screen.
Before We Get Started…
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This webinar is eligible for CPE credit. To receive credit, you will need to answer periodic polling questions throughout the webinar.
External participants will receive their CPE certificate via email immediately following the webinar.
CPE Credit
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The information in this Executive Education Series course is a brief summary and may not include all
the details relevant to your situation.
Please contact your service provider to further discuss the impact on your business.
Disclaimer
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Today’s Presenters
Cindy Dwyer, CPA Shareholder 913.234.1022 | [email protected] Cindy is the President of MHM Retirement Plan Solutions and a Shareholder of Mayer Hoffman McCann P.C. She supervises staff, oversees technical research, and provides quality control services. She has previously served as the national Chairperson of the American Institute of Certified Public Accountants Employee Benefits Technical Resource Panel (TRP) and currently serves as an advisory member of the TRP. Additionally, Cindy has been a recurring speaker at the American Institute of Certified Public Accountants National Conference on Employee Benefit Plans. Cindy is also a committee member and former chair of the Employee Benefits Institute sponsored by UMKC School of Law.
Jeffrey Gluck, CPA Shareholder 212.790.5844 | [email protected] Jeff is the CBIZ Senior Managing Director and an MHM Shareholder in the New York office and leads the office overseeing client service and strategic direction. Jeff joined CBIZ and MHM in 1992 and has more than 20 years of experience. Jeff works closely with privately-held businesses in various industries and specializes in accounting and transaction services for employee stock ownership plans (ESOPs).
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Hal Hunt, CPA Shareholder 913.234.1012 | [email protected]
Hal leads MHM’s Employee Benefit Plan (EBP) Audit Practice. With over 25 years of diverse experience with EBP accounting, auditing and compliance issues, he is also a member of the firm’s Professional Standards Group as EBP subject matter expert. As the EBP National Practice Leader, Hal is responsible for providing internal training, along with providing technical support to engagement teams, serving as engagement quality reviewer and developing resource tools for our EBP audit professionals. He served on the AICPA’s Employee Benefit Plan Audit Quality Center (EBPAQC) Executive Committee and is currently a member of the EBPAQC ESOP Task Force.
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Today’s Presenters
Mark D. Welker Partner, Husch Blackwell 816.983.8148 | [email protected] Chair of the firm's Tax & Benefits Department, Mark is considered clients’ go-to advisor on any important benefit or compensation matter. He focuses on all benefit and compensation matters, including the creation and operation of employee retirement plans, deferred and equity executive compensation, employee stock ownership plans, and health and welfare plans. Mark is highly regarded for his strategies and management of fiduciary and tax disputes.
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Today’s Agenda
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ESOP Overview
ESOP Transaction Case Study Manufacturing Company
ESOP Transaction Case Study Energy Company
ESOP OVERVIEW
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78.2 million Americans were born between 1946 and 1964 (the "Baby Boom" generation).
It has been estimated that Baby Boomers own about 7 million privately held businesses with over 2.5 million of these held by individuals who are age 55 or older.
Surveys and studies have indicated about half of business owners over the age of 55 may want to consider selling their business in the next 5 to 10 years.
This means that over 1 million Baby Boomers may be selling their business in the near future.
“Baby Boomer’s” Need for Transition Planning
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More than 12,000 ESOPs in U.S. (10% of private sector workforce—ESOPs cover over 11 million employees)
30% to 40% are 100% owned by an ESOP 40% to 45% are S-Corporation ESOPs Approximately 50% are ESOPs with <125
participants ESOPs are found in all industries Most ESOPs are or were leveraged, (i.e. they used
borrowed funds to acquire stock bought by the ESOP)
(Source: National Center for Employee Ownership, A Statistical Profile of Employee Ownership, updated January 2014)
ESOP Population
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An ESOP is a tax-qualified, defined contribution, employee benefit plan (ERISA)
Invests primarily in the stock of the sponsoring company
“Tax-Qualified” in that sponsoring company and selling shareholder receive various income tax benefits
What is an ESOP?
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Provide a market (at fair market value as determined by an independent appraiser) for partial or complete sale by existing shareholders
Borrow from a bank, the sponsoring company, or sellers to purchase a block of stock
Make corporate tax-deductible contributions, including loan principal and interest payments via the ESOP (25% of payroll for S Corporations, more if a C Corporation)
Why ESOPs?
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Independent valuation of privately held employer securities, must be performed annually.
This annual valuation is reported to participants and is used to redeem shares from retiring plan participants.
ESOP Complexities
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The ESOP receives a loan and uses the proceeds to purchase stock from current shareholders.
These shares are held in trust and are released into employee accounts at a rate corresponding to the ESOP’s debt amortization.
Leveraged ESOPs
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1) Lender lends to company. 2) Company lends to ESOP. 3) ESOP buys stock from existing shareholders. 4) Company makes annual tax-deductible contributions to ESOP. 5) The ESOP then in turn repays company. 6) Company repays Lender (but note that amortization schedule demanded by Lender is typically
much shorter than schedule on ESOP loan, which is typically 20-30 years). 7) Employees typically receive cash after they retire or leave (vesting schedule).
Leveraged ESOP
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Creates liquidity at fair market value (as determined by an independent appraiser)
Control maintained (if desired)
Deferral of capital gains taxes available to qualified sellers of C corporation stock (IRC 1042)
Establishes value and provides liquidity for estate planning
Advantages for Selling Stockholders
May continue employment; additional equity incentives still available (stock option, bonus, purchase, phantom stock, etc.)
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If company is an S Corporation: If 100% ESOP-owned: no U.S. income taxes owed If <100% ESOP-owned: ESOP’s share of tax distributions can be used to
repay debt
Whether S or C Corporation, the company may deduct ESOP contributions
Allows company to redeem a minority shareholder or shareholders whose interests are no longer aligned with the company
Keeps ownership of the company in the local community Motivation and retention of employees: proven to improve
profitability and employee satisfaction
Advantages to Operating Company and Remaining Shareholders
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(The ESOP can own less than 100%, with a proportional reduction in tax-free income.)
100% ESOP – Five-Year Value of Tax-Free Operations by Electing S Corporation Status
Assume: $500,000 pretax income 10% growth rate 40% effective tax rate
Total Tax Savings: $1,221,020 = more than two times the current income!
1 2 3 4 5 Pretax Income $500,000 $550,000 $605,000 $665,500 $732,050
Tax Savings $200,000 $220,000 $242,000 $266,200 $292,820
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Employees share directly in equity growth of company
ESOP employer contributions tend to be larger than profit sharing contributions
ESOP accounts accumulate tax-free and are tax-favored at distribution
Advantages for Employees
ESOP TRANSACTION CASE STUDIES
Manufacturing Company, Inc.
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Background Privately owned manufacturer of high quality, industrial safety
equipment sold through a worldwide network of supply distributors. Operations are conducted from company-owned facilities and
employs approximately 250 people (25% union). The Company is fiscally conservative and debt free. Annual revenue of approximately $75 million and income from
operations of approximately $19.7 million, increasing at a compound growth rate of almost 3% per year.
The Company is an “S” corporation. The Company has a profit sharing plan and discretionary
contributions were approximately $2 million annually.
Manufacturing Company, Inc.
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Objectives The majority stockholder owns 70% of the Company and is in his
early 70s. The minority stockholder owns 30% of the Company and is in his
early 60s. Although the Company has been highly profitable, the stockholders
are unable to find a buyer who would pay the cash asking price. Preliminary calculations of the FMV of the Company’s stock is
$99.5 million after distribution of AAA of $33.6 million.
Manufacturing Company, Inc.
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FMV of Company Stock
Fair Market Value Estimate: EBITDA $21,235,201 Multiple X 6 Enterprise Value 127,411,206
Excess Cash/Investments 16,700,000 Debt (distribution of previously taxed earnings) (33,600,000) Equity Value 110,511,206 Non-marketability Discount (10%) (11,051,121)
Fair Market Value $99,460,085 Outstanding Shares 900,000 Fair Market Value per Share $110.51
Manufacturing Company, Inc.
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Can the Company do a 100% ESOP using a normal structure? FMV after AAA distribution: $99.5 million Employee eligible compensation: $12.2 million Maximum contribution for S corporation: $3 million Difficult to fully amortize $99.5 million with limitation on
annual debt service of $3 million.
Manufacturing Company, Inc.
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Transaction Overview―Company: On December 1, 2014 the Company forms an ESOP effective
January 1, 2014. On December 31, 2014, the Company makes a distribution of
previously taxed earnings of $33.6 million. On January 1, 2015, the Company redeems 90% of the
Company’s outstanding shares for $89.5 million. Stock redemptions and distributions of previously taxed
earnings are financed using a combination of senior, mezzanine and seller financing at 3% interest, amortized over 10 years with a balloon payment after 7 years.
Manufacturing Company, Inc.
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Transaction Overview—ESOP: On January 1, 2015, the Company loans $9.9 million to the
ESOP out of excess cash at 3% interest payable over 30 years.
Also on January 1, 2015, the ESOP purchases the remaining 10% of the Company’s outstanding shares for $9.9 million.
The Company executes a stock split, resulting in the ESOP owning 900,000 shares representing 100% of the outstanding stock, valued at $11/share.
Manufacturing Company, Inc.
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Sources and Uses of Cash
Sources Uses
Excess Cash $ 9,900,000 AAA Distribution $33,600,000
Senior Secured Debt 63,700,000 Stock Redemption 89,500,000
Mezzanine Debt 30,800,000 ESOP Loan 9,900,000
Seller Notes 28,600,000
Total $133,000,000 Total $133,000,000
Manufacturing Company, Inc.
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Debt Terms and Assumptions Senior Amount (3 X EBITDA) $63.7 million Amortization 10 years Maturity 7 years Interest rate 4%
Mezzanine Sellers Amount (1.5 X EBITDA) $30.8 million Amount $28.6 million
Amortization 10 years Amortization 10 years Maturity 7 years Maturity 7 years Interest rate 11% Interest rate 3% Internal rate of return 14% Internal rate of return 18% Warrants (# issued) 42,887 Warrants (# issued) 199,083 Warrants (exercise price) $11.00 Warrants (exercise price) $11.00
(Assumes excess cash is used to fund debt)
Manufacturing Company, Inc.
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Subordinated N
ote
ESOP
Mezzanine Lender
Manufacturing Company, Inc.
70% Owner 30%
Owner
$30.
8 M
M
Bank
Warrants
Note
$9.9 MM
$63.7 MM
Secured Note
*70% Owner: [70% x $28.6 MM] Redemption Note [70% x $60.9 MM] Redemption Cash [70% x $33.6 MM] AAA Distribution
**30% Owner: [30% x $28.6 MM] Redemption Note [30% x $60.9 MM] Redemption Cash [30% x $33.6 MM] AAA Distribution
Stock **
Cas
h, N
ote
& W
arra
nts
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Management Incentives Typically grant Stock Appreciation Rights (SARs) to
management Typically not exercisable until only debt remaining is
Senior, Secured Debt and can borrow to pay it off Typically 5% to 15% on a fully diluted basis Assumed 10% in this deal, exercisable at $11/share
Manufacturing Company, Inc.
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Post-Closing Capitalization ESOP 900,000 shares 70.93% Mezzanine Warrants 42,887 shares 3.38% Seller Warrants 199,083 shares 15.69% SARs 126,885 shares 10.00% 100.00%
Manufacturing Company, Inc.
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ESOP Debt Service Limits
Post Transaction Year 1 Year 2 Year 3 Year 4 Year 5
Total wages $ 19,200,000
Less non-participating wages (6,400,000)
Less non-eligible wages (600,000)
Eligible wages 12,200,000 25%
Total maximum contributions to all DC plans
$ 3,050,000 $ 3,141,500 $ 3,235,745 $ 3,332,817 $ 3,432,802 $ 3,535,786
Less assumed 401(k)/Profit Sharing contributions
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Assumed maximum ESOP contribution $ 3,050,000 $ 3,141,500 $ 3,235,745 $ 3,332,817 $ 3,432,802 $ 3,535,786
#MHMWebinar
Manufacturing Company, Inc.
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Manufacturing Company, Inc. ESOP
Cash Flow – Post ESOP Transaction
Post Transaction Year 1 Year 2 Year 3 Year 4 Year 5
EBITDA $ 21,235,201 $ 21,872,257 $ 22,528,425 $23,204,277 $23,900,406 $24,617,418
Less capital expenditures (1,000,000) (1,030,000) (1,060,900) (1,092,727) (1,125,509)
Cash flow available for debt service 20,872,257 21,498,425 22,143,377 22,807,679 23,491,909
Company cash contributions to ESOP (507,387) (507,387) (507,387) (507,387) (507,387)
ESOP debt repayment to Company 507,387 507,387 507,387 507,387 507,387
Transaction Financing Debt service interest
(6,794,000)
(6,304,324)
(5,781,626)
(5,223,049)
(4,625,449)
Debt service principal (9,642,310) (10,131,986) (10,654,683) (11,213,260) (11,810,861)
Annual cash flow $ 4,435,947 $ 5,062,115 $ 5,707,068 $ 6,371,369 $ 7,055,600
Cumulative excess cash $ 6,754,100 $ 11,190,047 $ 16,252,163 $ 21,959,230 $ 28,330,600 $ 35,386,199
Warrants/SARs would be exercised in Year 10 for $49.4 MM cash payment by Company: $32.1 MM for warrants & $17.3 MM for SARs
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Manufacturing Company, Inc.
FMV of Company Stock – Post ESOP Transaction
Post Transaction Year 1 Year 2 Year 3 Year 4 Year 5
EBITDA $ 21,235,201
Multiple X 6
Enterprise Value $127,411,206 $131,233,542 $135,170,548 $139,225,665 $143,402,435 $147,704,508
Cumulative Excess Cash/Investments 6,754,100 11,190,047 16,252,163 21,959,230 28,330,600 35,386,199
Outstanding Debt (123,100,000) (113,457,690) (103,325,704) (92,671,021) (81,457,761) (69,646,900)
SARs FMV * - (154,165) (562,101) (1,299,937) (2,393,051) (3,816,066)
Warrants FMV * - (2,161,928) (4,581,628) (7,485,268) (10,630,878) (13,776,488)
Equity Value 11,065,306 28,811,734 42,953,278 59,728,670 77,251,345 95,851,253
Non-marketability discount (10%) (1,106,531) (2,881,173) (4,295,328) (5,972,867) (7,725,135) (9,585,125)
Equity Value $ 9,958,775 $ 25,930,561 $ 38,657,950 $ 53,755,803 $ 69,526,211 $ 86,266,128
Equity value per ESOP share (without dilution) $ 11.07 $ 28.81 $ 42.95 $ 59.73 $ 77.25 $ 95.85
* Warrants/SARs would be exercised in Year 10 for $49.4 MM cash payment by Company: $32.1 MM for warrants & $17.3 MM for SARs
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Manufacturing Company, Inc.
ESOP Participant Account Balances
Post Transaction Year 1 Year 2 Year 3 Year 4 Year 5
Shares Allocated - 30,000 30,000 30,000 30,000 30,000 Cumulative Shares Allocated, End of Period
-
30,000
60,000
90,000
120,000
150,000
Unallocated Shares, End of Period 900,000 870,000 840,000 810,000 780,000 750,000
Total Shares, End of Period 900,000 900,000 900,000 900,000 900,000 900,000
Total Eligible Compensation $ 12,200,000 $12,566,000 $ 12,942,980 $ 13,331,269 $ 13,731,207 $ 14,143,143
Participant # 1 ESOP Account Statement Annual Compensation $50,000 $51,500 $53,045 $54,636 $56,275 $57,964
Shares Allocated - 123 123 123 123 123
Cumulative shares allocated - 123 246 369 492 615
FMV per share $ 7.85 $ 20.00 $ 30.00 $ 42.00 $ 55.00 $ 68.00
Total participant account at FMV $ - $ 2,459 $ 7,377 $ 15,492 $ 27,049 $ 41,803
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ESOP Benefit
Analysis
Company Annual
Contribution to ESOP
Annual Eligible Compensation
Contribution as a % of
Compensation
FMV of Stock Released Each
Year
Stock Released as a % of
Compensation
FMV of all
ESOP Stock
Year 1 $ 507,387 $ 12,566,000 4.04% $ 600,000 4.77% $ 18,000,000
Year 2 507,387 12,942,980 3.92% 900,000 6.95% 27,000,000
Year 3 507,387 13,331,269 3.81% 1,260,000 9.45% 37,800,000
Year 4 507,387 13,731,207 3.70% 1,650,000 12.02% 49,500,000
Year 5 507,387 14,143,143 3.59% 2,040,000 14.42% 61,200,000
Year 6 507,387 14,567,437 3.48% 2,460,000 16.89% 73,800,000
Year 7 507,387 15,004,460 3.38% 2,880,000 19.19% 86,400,000
Year 8 507,387 15,454,594 3.28% 3,360,000 21.74% 100,800,000
Year 9 507,387 15,918,232 3.19% 3,840,000 24.12% 115,200,000
Year 10 507,387 16,395,779 3.09% 4,320,000 26.35% 129,600,000
Total $ or Avg % $ 5,073,865 $ 144,055,101 3.52% $ 23,310,000
Manufacturing Company, Inc.
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SAR Values Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
FMV/share
$20.00
$30.00
$42.00
$55.00
$68.00
$82.00
$96.00
$112.00
$128.00
$144.00
Exercise Price/share
(7.85) (7.85) (7.85) (7.85) (7.85) (7.85) (7.85) (7.85) (7.85) (7.85)
SAR value/share
$12.15
$22.15
$34.15
$47.15
$60.15
$74.15
$88.15
$104.15
$120.15
$136.15
X SARs Granted
126,885
126,885
126,885
126,885
126,885
126,885
126,885
126,885
126,885
126,885
SAR Value $1,542,000
$2,811,000
$4,333,000
$5,983,000
$7,632,000
$9,409,000
$11,185,000
$13,215,000
$15,245,000
$17,275,000
Vesting % 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
SAR Vested Value
$154,000
$562,000
$1,300,000
$2,393,000
$3,816,000
$5,645,000
$7,829,000
$10,572,000
$13,721,000
$17,275,000
Manufacturing Company, Inc.
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ESOP Repurchase Liability This should be modeled Typically restrict ESOP distributions until after ESOP
Debt is paid down
Manufacturing Company, Inc.
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Planning Opportunities for Sellers: Employment agreements? Participation in ESOP? Company has until the due date of its 2014 corporate
income tax returns to make an ESOP contribution of up to 25% of qualified compensation. Tax deduction flows through to sellers
If Company’s business is cyclical and typically has a loss in January, then could delay closing to February 1, 2015. January 2015 loss would flow through to Sellers.
Manufacturing Company, Inc.
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Planning Opportunities for Sellers: Warrants may be worth very little at closing Consider European Style warrants Consider Deal price ($11/share) versus Post-Deal value
(nearly $0/share). Consider contributing warrants to intentionally defective
grantor trust. Trust contributes warrants to partnership for capital
account equal to warrant value. Heirs receive profits interest.
Heirs pay mostly capital gains taxes on future warrant appreciation.
Manufacturing Company, Inc.
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Planning Opportunities for Company: Defer revenue from 2014 to 2015 Accelerate expenses into 2014 If Company has income outside U.S., pursue maximizing U.S.
income and minimizing income from outside U.S. Sale/leaseback of real estate, as an example: Client in hospitality/entertainment industry 100% leveraged ESOP: total debt $170 million (FMV
$175 million), tight loan covenants, $28 million EBITDA Sold real estate for $140 million to REIT for $14 million
annual rent Borrowed $43 million senior secured debt from REIT Repaid all deal debt, much more lenient covenants
Manufacturing Company, Inc.
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Who controls Company post-ESOP sale? The Board of Directors Board appoints/removes trustee Trustee votes stock in board elections Trustee can be subject to Board direction Typically Board would be sellers at least until seller
notes are repaid
Manufacturing Company, Inc.
ESOP TRANSACTION CASE STUDIES
Energy Company, LLC
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At least one owner of Energy Company, LLC is demanding liquidity:
Private Equity Fund that has run its course owns 25% Proxy contest with board; litigation pending
The Problem
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Reduce board – member strife by liquidating owner who demands exit
Concentrate ownership in friendly in-community hands
Provide means for employee ownership (currently problematic in LLC structure) to enhance retention
Improve employee commitment to business profitability
Minimize use of Energy Company, LLC cash for buyout
Maximize tax efficiency
Energy Company, LLC Goals
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Find a buyer for owner Who? Will buyer be a good fit for Energy Company, LLC goals? Avoids use of any Energy Company, LLC funds
Energy Company, LLC repurchases units
Must be done with after-tax funds – tax inefficient Increases proportionate ownership of remaining owners
Energy Company, LLC Alternatives
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ESOP purchases owner units to provide liquidity Record owner is Energy Company, LLC-selected trustee Keeps control with Energy Company, LLC board Beneficial owners are the employees, but they don’t vote
(except on certain sales of the business) Employees have stake in Energy Company, LLC profitability Keeps the value in the community Energy Company, LLC can fund the buyout entirely with pre-tax
funds – very tax efficient
Energy Company, LLC Alternatives
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Units to be sold would be transferred to a new corporation
(Newco) Newco elects to be taxed as S Corporation
Energy Company, LLC employees become employees of
Newco Energy Company, LLC and Newco enter into services
agreement
Newco adopts a form of qualified retirement plan – Employee Stock Ownership Plan (ESOP)
How Would ESOP Work?
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Seller sells Newco Stock to ESOP How does ESOP pay for the stock?
Energy Company, LLC loans to Newco Newco Loans to ESOP
How does Newco repay Energy Company, LLC?
Energy Company, LLC and Newco enter into services agreement
Newco elects to be taxed as S Corporation Because ESOP is tax-exempt trust, it pays no tax on Energy
Company, LLC distributions or service payments it receives.
How Would ESOP Work?
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Energy Company, LLC issues K-1 and distributions to owners,
including Newco
ESOP can use full amount of distribution to repay loan from Newco, which repays loan from Energy Company, LLC
Energy Company, LLC makes fully tax-deductible payments to Newco in exchange for services (employees) Can set payments to Newco at a margin above
actual cost of employees Any excess can also be used to pay down loans
Diagrams follow
How Would ESOP Work?
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Status Quo
Selling Owner
Energy Company,
LLC
Continuing Owners
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Step One
Selling Owner
Energy Company,
LLC
Continuing Owners
Newco
LLC Interest
100%
Selling Owner
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Step Two
Energy Company,
LLC
Continuing Owners Newco
Selling Owner
Transfer Employees
ESOP
Loan $
$
100% Newco Stock
100% Newco Stock
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Step Three
Energy Company,
LLC
Continuing Owners
Newco
ESOP
$ Payment on Services Contract*
*100% tax deductible to Energy Co., LLC, but Newco pays no tax on this Structure; include amount sufficient to enable Newco to repay its loan from Energy Co., LLC. This allows Energy Co., LLC to essentially fund buyout with pre-tax dollars. The “price” is that the stock remains outstanding (beneficially owned by employees) rather than being redeemed.
Distribution to Owners
$ Payment on Loan
Distributions to Owners
$ Payment on Loan
$ Contribution to ESOP
100%
100% Newco Stock
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Step Four
Energy Company,
LLC
Continuing Owners
Newco
ESOP * Cash will be needed to fund buyouts of terminated employees. However, that can be mostly delayed until after the loan from Energy Co., LLC to Newco is repaid. Energy Co., LLC can deduct those payments if they are funded as part of payment under services contract. 100%
$ ESOP
Repurchase Liability
Terminated Participants
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Energy Company, LLC Illustration
Energy Company,
LLC
Lender
Newco
ESOP 25%
Total Tax Considerations (1) Energy Co., LLC payment on services
contract fully tax deductible: $160M tax benefit
(2) Energy Co., LLC tax distribution paid back to Energy Co., LLC: $800M tax Benefit
(3) Energy Co., LLC payment of interest to Lender fully tax deductible: $200M tax benefit
(4) Energy Co., LLC receipt of interest on loan to Newco included in income: $200M tax cost
(5) Net tax benefit: $960M
(4) $330 M Contribution
$2 MM Loan
Payment
Non-ESOP Shareholders
75% (5) Loan Payment = $330 M
Debt to Newco =$10 MM Annual Loan Payment $330,000
(1) Taxable Income = $8 MM
Debt to Lender = $10 MM Annual Payments = $2 MM
(2) Tax distribution = $2.4 MM
(6) Pay $1.2 MM Loan Payment
(2) Tax distribution = $800 M
(3) Payment on services contract = Cost + $400 M
Debt to Energy Co., LLC - $10MM Annual Loan Payment = $1.2MM
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Questions?
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If You Enjoyed This Webinar…
Join us for these related EES courses: 8/19 & 8/28: ERISA Plan Internal Controls and Your
Fiduciary Responsibilities 10/9 & 10/21: Actions with Unintended Consequences in
ERISA Plans 12/9 & 12/17: Understanding Your Employee Benefit Plan’s
Investments
Read these related publications: Employee Stock Ownership Plan Primer
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