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.

New ESOP Helps Owners Stay Involved While Diversifying Their Assets

Plain City, Ohio-based Midwest Molding has entered a new chapter in the life of the company. The plastic injection molding company, which was founded in 2000 and currently has 125 employees, produces custom, high-quality, cost-competitive plastic parts and assemblies. Owners Bill Razor and David Grimm recently worked with the experts at Lazear Capital Partners (LCP) to implement an employee stock ownership plan (ESOP). The transaction will transition ownership of the company to its employees while providing financial flexibility and maximal tax advantages for the sellers.

 

The ESOP makes it possible for the owners to diversify their assets and still be involved with the company. It's a way to continue working in the business, but without putting all their eggs in one basket. "This allows me to keep the job I love and enjoy," Razor said. "But I also won't have all of my financial future tied up in injection molding."

 

They also view the ESOP as a way to reward and motivate the employees. "Our employees work hard, and this creates a more direct correlation between the results of the company and what the employees will get out of it," Razor said. An ESOP rewards the employees for the role they've played so far while further incentivizing them to grow the company.

 

Razor and Grimm did their homework before choosing an ESOP. "We did some exploring as far as selling the company," Grimm said. "But we realized that wasn't the path for us. We would most likely lose all decision-making control, and we may be passing it on to someone who would not care for the people who have been taking care of us for years." With an ESOP, the owners retain some control, and the employees are taken care of for a long period of time.

 

More growth is in the future. "We have experienced plastic veterans and young, talented engineers who are ready to run with this. The team wants to see it grow," Grimm said. "On the back end, we are reaping the benefits of that as well." In addition to facilitating growth, they believe the ESOP will help with employee recruitment and retention down the road.

 

To implement the transaction, the owners worked with Todd Goldman, managing director at LCP. "We loved working with Todd and the rest of the team at Lazear. He was very responsive and able to complete the transition in a timely manner. Even after the close, he's still available to answer questions and give advice," Razor said. "It's apparent that Todd and Lazear care about the ongoing success of Midwest Molding."

 

The Benefits of an ESOP

 

In addition to diversifying their assets, taking care of their employees and growing the company, the ESOP:

  • Allows for a business transition with significant tax advantages for the selling owners as well as the company

  • Makes it possible for the owners to sell the business without relinquishing operational control

  • Improves employee retention and recruitment efforts

  • Creates a no-cost, qualified, defined contribution retirement plan for the employees

  • Gives the employees time to prepare for their new role as shared owners

  • Allows the company to maintain its legacy

  • Encourages the company to stay geographically rooted in one location

If you're considering a sale or other ownership transition, we would be happy to review your situation and share our thoughts on how to maximize value.

Stanley Tree Service is now proudly 100% employee-owned

In an address in early December 2020, Stanley Zuba announced the ownership of the company he started in 1986 is now in the hands of his nearly 200 dedicated employees. Stan will remain with the company as President & CEO with Bruce Berard as the company’s Vice President & COO.  Day to day operations will remain the same and the company will continue to offer the same great service it always has, while proudly calling Rhode Island home. 

Stan delivered the news that shortly before the holidays everyone who calls Stanley Tree Service their employer, can now call the business their own. “Each and every employee will be given the opportunity to own a portion of the business. There are other employee-owned companies out there, but we wanted to be better” said Zuba.

Lazear Capital's team worked with Stanley Tree Service to design a custom solution that included employee benefits, financial flexibility, and maximized tax advantages. The transaction marks the fourth recently completed deal by Lazear Capital in tree care services, as the firm continues to expand its footprint in the industry. ​

Stanley Tree Service now offers an additional benefit to its workforce upon retirement which reinforces its founder’s commitment to those that make the company shine every day. Because of this, the company hopes to attract more employees with a passion for the green industry and continue to grow within the community.

Stanley Tree Service was founded in 1986 and recently moved to its new headquarters in Smithfield, RI in 2017.

About Stanley Tree Service: 

Stanley Tree Service currently operates in three states serving residential, commercial, and utility customers since 1986. Stanley Tree Service offers services in tree pruning and removal, stump grinding, brush mowing, plant health care and land clearing all supervised or performed by licensed arborists.  
 

Turn-Key Tunneling: New ESOP Puts People First  

Founded in 2005, Columbus, Ohio-based Turn-Key Tunneling, Inc. is a leading regional trenchless excavating contractor serving public and private clients and their infrastructure needs. Owners Brian and Christine Froehlich recently worked with the experts at Lazear Capital Partners (LCP) to implement an employee stock ownership plan (ESOP), a move they view as being integral to the company's success moving forward. An ESOP is an employee benefit plan that transitions ownership of the company to its employees while providing financial flexibility and maximal tax advantages for the seller
 
Brian and Christine worked hard to establish an employee-centric culture at Turn-Key, and were quick to point out that many of the 48 employees have contributed significantly to Turn-Key's growth and success. So it's no surprise that, in addition to the tax benefits, they also chose an ESOP for the role it plays in helping to retain employees. "We have a lot of really great people who we wanted to see profit from the business as it continues to do well," Brian Froehlich said.
 
Brian believes an ESOP is a good solution for companies like Turn-Key where employees can contribute directly to a team. "Everybody has some skin in the game," he said. "They can take advantage of this as an opportunity to police themselves and the others they work with. It makes everybody get better and work better." 

 

While Turn-Key's retention rate is already one of the best in the industry, Brian believes there is still room for improvement. Employees are expected to travel to multiple states to do the work, which is a sacrifice he appreciates and does not take for granted. "Our people give up a lot and miss a lot at home. We believe in taking good care of them," he said. That means giving them what they need to build the projects – and giving them credit for the work they do.

 

Choosing an ESOP

 

With retirement less than a decade away, Brian recognizes how important it is to teach the company's younger personnel everything about the business. "A lot of subject matter experts don't understand that their greatest value is to teach others instead of just performing the work," Brian said. Training and teaching others helps to ensure they can take over when the time comes.  

 

Brian plans to stay actively involved with the company for another five or six years before taking what could be a more laid-back role in which he can share his knowledge and experience. Until then, he will continue to focus on growing the company and developing people. "Whether our employees stay here or move on, we always want to be remembered as a key to their success into the future," he said.  

 

In addition to putting people first, employee ownership through an ESOP:

  • Allows for business transition with significant tax advantages for the selling owner as well as the company

  • Makes it possible for owners to sell the business without relinquishing operational control

  • Improves employee retention and recruitment efforts

  • Creates a no-cost, qualified, defined contribution retirement plan for employees

  • Gives the employees time to prepare for their new role as shared owners

  • Lets companies maintain their legacy

  • Encourages companies to stay geographically rooted in one place

To enact the transaction, LCP partnered with KeyBank. "Lazear has proven to be a great partner to KeyBank on a number of ESOP transactions in 2020," said Douglas Dell, senior vice president and manager of Colorado Commercial Banking for KeyBank. "Our clients have relied on Lazear's expertise to provide sound advice on ESOP structuring to provide sustainability, tax efficiency and regulatory compliance. In addition, Lazear listens and provides succession and liquidity options that meet the selling shareholder's goals for a transition."

If you're considering a sale or other ownership transition, we would be happy to review your situation and share our thoughts on how to maximize value – all at no cost if you decide not to work with us.