French Associates Sells to ESOP
French Associates, a Rochester Michigan based architectural firm founded in 1971, is pleased to announce the sale of 100% of the Company to an Employee Stock Ownership Plan (ESOP). Lazear Capital Partners, an investment banking firm in Columbus, Ohio, was engaged to lead the transaction and served as the Company's financial advisor in negotiating deal terms and the arrangement of financing.
French Associates is an industry-leading architectural firm focusing on designing K-12 schools and has designed over 375 schools in Michigan. The Company announced the transaction to their employees at the Company's 50th Anniversary party at the Royal Park Hotel on May 8th. When choosing an exit strategy, owners Dale Jerome and Paul Corneliussen wanted to reward their loyal, hardworking employees by selling to the ESOP. Said Jerome, "After considering a variety of options for ownership transition, we wanted to learn more about ESOPs. After our first meeting with Lazear, we quickly understood that an ESOP would align well with the culture of our organization. Their strong knowledge and expertise in guiding us through the transaction were evident at every step in the process." Added Corneliussen, "From our initial 'ESOP 101' presentation from Lazear Capital Partners to their continuous ESOP mentoring that continued through the closing of our transaction, the Lazear team has been the highlight of this path for our firm. We could not have imagined a better "Captain" to guide our plan."
This transaction allows the 50-year legacy of French Associates to live on and gives each employee a stake in the future success of the organization. Every employee of French Associates will become a beneficial owner in the Company, and the value of this ownership grows as the Company succeeds.
An ESOP is a tax-advantaged way to sell a business and the only way to sell a company where the selling shareholders can avoid paying capital gains taxes. Additionally, an S-Corp entity owned by an ESOP does not pay federal or state income taxes. Employees receive annual share allocations into their ESOP participant account; the value of the accounts grows tax-deferred based on Company's performance. When employees retire, they can cash out their account value. ESOPs are similar to 401k's but have one crucial difference: the employee does not contribute their own money; instead, the value is contributed by the Company.
Tax savings and risk-free employee benefits make ESOPs a powerful option for shareholders looking to monetize their ownership positions while retaining the Company's legacy and the employees crucial to that success.
According to data provider Refinitiv, M&A volume set a record of $1.3 trillion in the first quarter of 2021.