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Many closely held companies have only two potential sets of buyers – family members of the founding generation or managers and other employees of the enterprise.
The market of third-party buyers for closely held companies can be very thin, so that when family members are not suitable buyers of a company, often the best solution is to sell to employees. But sales to employees are unlike sales to third-parties or family members, involving complex issues of how to finance the sale, transition management and control of the enterprise, retain key employees, and tax treatment.
This program provides a detailed discussion of the major issues of selling to employees, including valuation, how the sale price is financed, transition periods, retaining employees not in the buyout group, and tax treatment.
Part 2 topics include:
- Overview of alternative structures and the tradeoffs of each
- ESOPs – structural, practical and tax issues, including leveraged buyout options
- Use of company redemptions of founders to accomplish a transfer
- Crucial issues in drafting "earnouts" on sales to employees
- Seller financing options, including long-term notes and security interest in assets