Long Point Capital - ESOP Expertise
Why is a Private Equity Firm Investing in ESOP Companies?
Long Point Capital started investing in ESOP companies in 2004. Why? For two primary reasons – the tax incentives that Congress established to create ESOPs, and the employee productivity benefits encouraged by ESOPs. Please read an interview with Founding Partner Ira Starr in Forbes – The Private Equity-ESOP Hybrid for a history of Long Point Capital and ESOPs.
Why Haven’t I Heard of the PE+ESOP Transaction?
Many ESOP advisors are not aware that a private equity firm like Long Point Capital will invest in an ESOP transaction. We are trying to change that by educating the ESOP community of the advantages of a PE+ESOP Recap. If you believe that a PE+ESOP Recap will meet your goals better than a Traditional ESOP transaction, we are happy to discuss the specifics with your advisor.
ESOP 101 – For Those of You Who are New to ESOPs
An ESOP is a retirement plan—like a 401K—that invests in the stock of the company that established it. Like regular 401Ks, the investments grow tax-free until the securities are sold. Technically, an ESOP is organized as a tax-free trust that owns stock in the company. Congress wanted to incentivize employee ownership and established special tax savings for business owners to establish ESOPs. Learn more about ESOPs on our Resources page.
Why Doesn’t Everyone Offer Tax-Efficient Liquidity?
We have been investing in ESOP transactions since 2004 and are the private equity experts in the field. We have spent many years refining this structure so that it will work for you and for us. Others may think it is too complicated. We have done it many times – so we make it work simply and efficiently. Please read Private Equity and ESOPs – A Creative Combination for the basics.
What are the Common Concerns with a PE+ESOP Recapitalization?
- Your Lawyer Or Accountant May Not Be Familiar With The Transaction
- The PE+ESOP Recap is a specialized transaction that requires expertise with ESOPs. If your advisor does not have this expertise, there are many ESOP specialists that can aid their understanding and supplement their advice to you. It really works.
- Your Financial Advisor Thinks The Transaction Is Complicated And Lengthy
- The transaction is complicated but it is not lengthy. The PE+ESOP Recap takes no more time than a traditional Private Equity Recapitalization. We have standardized documentation and an experienced set of professionals with whom we work on these transactions.
- You Don’t Like or Don’t Understand ESOPs
- You may think that your employees will manage the company or will have access to the company’s financials. This is a myth. We create a board of directors to govern the Company; just like the one we would create in a traditional Private Equity Recapitalization. We only provide the employees with an annual statement with the number and value of their allocated shares. No other financial information is required. There are many misconceptions about ESOPs. Please contact us if you have concerns.
How do I know if it makes sense for my Company to do this transaction?
If you are intrigued by the PE+ESOP Recap, we would be happy to perform a feasibility study for you. Please contact a member of our Team to learn how to do this.