Mercer Capital’s advisory professionals have active roles in The ESOP Association and other employee ownership organizations.
Timothy R. Lee, ASA, Managing Director and a member of the ESOP Association’s Valuation Advisory Committee, attended the recent ESOP Association’s Professional’s Forum in New Orleans (February 8, 2023). He was not surprised to learn that deal activity was facing headwinds due to increased financing costs and tighter lender terms. However, selling to an ESOP remains a viable option for many.
Transactions that might have previously involved third-party senior financing with seller subordination are currently shifting to deals with increased seller participation. Rather than below-market cash rates on seller notes and deferred seller principal amortization, sellers can opt to provide more of the financing, achieve a more favorable overall rate structure, enjoy more timely liquidity through amortization design, avoid the aggravation of lender negotiations, and get the ball rolling on ownership succession now without suffering any real deficit from selling in a market with tighter valuations and higher interest rates.
Mercer Capital provides services to internal and independent ESOP trustees, as well as to new ESOP sponsors and selling shareholders. If you are curious about ESOP ownership, don’t hesitate to contact a Mercer Capital transaction advisory professional about ESOP feasibility and planning.