The owner of a closely-held company who wants to sell the business is well advised to consider doing it through an ESOP, which brings numerous tax benefits while allowing the company to remain under control of the workers. However, an ESOP transaction is structured differently from a third-party acquisition, and potentially exposes the seller to a different set of risks. This is why it's important to consult an ESOP lawyer who knows the field and has experience with such transactions, instead of hoping that your M&A legal team can handle it.
Here are some of the differences between a third-party buyout and a sale through an ESOP:

• ESOP companies are required to receive outside appraisal and valuation.
• An ESOP doesn't usually require post-purchase price adjustments such as earn-out agreements, however...
• as a type of retirement benefit, it does have to comply with ERISA regulations.
• ESOP transactions need a preliminary feasibility study, but don't usually require forensic due diligence.
• As a trust, an ESOP places strict fiduciary duty on its administrator; mismanagement or conflict of interest can lead to employee lawsuits.
• Compensation and share allocation through an ESOP needs to be structured fairly, so present and future employees aren't excluded.

These are only some of the issues that can present a challenge to a financial advisor who is unfamiliar with ESOPs. Even after a transaction, an ESOP must undergo an annual stock valuation; an improper stock price can be the trigger to legal action from employees or government agencies. At ESOPMarketplace.com you will find lawyers and other advisors who are well versed in every area of ESOP law, as well as private equity transactions, executive compensation and much more. If your company needs expert counsel for an ESOP transaction or routine corporate governance issues, you will find qualified experts on ESOPMarketplace.com.

ESOPMarketplace.com not only lists skilled lawyers and valuation advisors but ones who are capable of defending valuations to the Department of Labor. Our goal is to help you assemble the perfect ESOP team to start, fund and grow your ESOP, including lawyers, accountants and every other specialist needed to do the job with precision and professionalism.

Our ESOP lawyers and legal advisors are well practiced in pre-ESOP and ESOP administration consultations.