In the News


by Sherri Lazear

ESOP Transactions as a Succession Planning Solution

There are approximately 77 million Baby Boomers in the United States. According to AARP, 10,000 Baby Boomers are turning 65 each day and this trend is expected to continue into the 2030’s. A recent survey found that approximately 75 percent of privately held businesses owned by Baby Boomers will be sold during the next 10 years.

Many owners are terrified by the thought of selling their businesses and are unable or unwilling to confront the reality of their age and need for liquidity. The owner’s identity is commonly intertwined with the company that they founded and led for decades. Owners fear the sale of their companies will leave them dispossessed of their leadership of the company and take away their “place in the world.”

Business owners are also concerned that a third-party purchaser may shut down operations or move them overseas and terminate employees. Consequently, many successful business owners put off performing any type of succession planning until it is too late, and death, disability or financial distress results in a sale of the company for less than fair value.

A sale to an Employee Stock Ownership Plan solves these problems. An ESOP is a qualified retirement plan for the benefit of the company’s employees. Rather than holding mutual funds, as is common in a 401(k) Plan, an ESOP primarily invests in the employer’s stock. The ESOP rules are set forth in the Internal Revenue Code and they provide two significant tax benefits:

  • The owner may sell their shares to an ESOP and either defer or eliminate entirely the capital gain tax on the sale. This typically increases the seller’s net proceeds by approximately one-third as compared to any other buyer. For instance, if an owner could sell the company for $20 million to a competitor, they would net $15 million after capital gains taxes. With an ESOP, the owner could net $20 million.

  • Since an ESOP is a retirement plan, all of the company’s post-ESOP earnings may be federal and state income tax free. This typically increases the company’s cash flow by approximately 50 percent. For instance, a company with $3 million in taxable income would pay approximately 33 percent in federal and state income tax ($1 million). With an ESOP, the income tax may be $0, for a savings of $1 million per year.

While the economic benefit of an ESOP transaction is obvious, many owners opt for a sale to an ESOP since it speaks to the two issues discussed above: a fear of losing their identity when they sell and a concern for their employees’ well-being under new ownership. A sale to an ESOP also enables the owner to continue to lead the company post-closing with operational control.

There are more than 7,000 ESOPs in the United States and approximately 8 percent of corporate equity is owned by ESOPs. The sale of a company to an ESOP works with numerous types of businesses such as:

  • Consultancies, which sell time and advice

  • Companies in which the material portion of the purchase price is contingent, usually based on future earnings

  • C Corporations that sell assets

  • Any business without a natural buyer

  • Companies in which the intellectual capital of the employees is the true asset

  • ESOP transactions are also ideal for manufacturers, distributors, companies in the construction industry, IT consultancies and staffing firms.


As the Baby Boomer generation continues to age and seek a means to obtain liquidity from their companies, an ESOP is an ownership transition tool that may provide them the greatest after tax proceeds while preserving their “place in the world” and their employees’ jobs.

December 12, 2019

Bruce Lazear Lays Out The Anatomy Of An ESOP

Often, growing your company is not just about making money. It’s a part of your identity.

“The idea of selling to a third party and being told it’s time to play golf for the rest of your life is terrifying to many,” Bruce Lazear says. “They don’t want to be irrelevant — and being rich doesn’t make them relevant. They have friends at the country club bored to tears.”

The partner at Lazear Capital Partners can identify with that.

“As someone who has had a business for 20 years, I appreciate how much it means to me at a level that’s beyond its earnings,” he says. “It’s part of my life. I enjoy the creative process of going to work. So do our clients.”

“With an ESOP, they can remain the CEO, even as they get their liquidity and their payments, and still be part of leading their team, growing their people and servicing their customers,” Lazear says.

However, few people truly understand the fundamentals.

That’s where an employee stock ownership plan comes in.

November 08, 2019

Central Ohio energy company goes employee-owned

Utility Technologies International Corp., a Groveport-based company that works in management, engineering, construction, operations and maintenance of natural gas pipelines and infrastructure, has completed a transition to employee ownership.

The company, founded by CEO Richard "Dick" Dickerson in 1992, is now controlled by the 69 people who work there.

Several of UTI's former shareholders will stay on as management in the company. But as he was considering succession planning, Dickerson said he saw an employee stock ownership plan "as a way to not only capitalize on their investment but ensure the cultural legacy of the company."

"Once we understood the benefits available to us and our employees it was clear this was the best path forward," Dickerson said in a statement.

Columbus-based investment management firm Lazear Capital Partners Ltd. structured the transaction and served as financial advisor for the company...

November 04, 2019

UTI Sells Company To ESOP Trust

Utility Technologies International Corp., a service provider to the natural gas pipeline industry, has sold 100 percent of the company to an employee stock ownership plan trust. The selling shareholders, led by majority shareholder Dick Dickerson, saw an ESOP as a way to not only capitalize on their investment but ensure the cultural legacy of the company.

With several shareholders staying on as members of management, UTI felt it was imperative to consider an option that best allowed the company to continue to grow organically.

UTI, located in Groveport, has been operating since 1992.

Lazear Capital Partners, an investment banking firm in Columbus, was engaged to arrange the transaction and serve as the company’s financial adviser.

June 20, 2019

Merchant Banking Firm Expanding in Arena District

With a wide range of businesses in transition, an Arena District-based firm that helps owners sell their companies is busy these days.

Lazear Capital Partners Ltd., a merchant banking firm catering to mid-market companies, is expanding to a 7,300-square-foot office on the second floor of 401 N. Front St.


The move represents a nearly 70% increase in square footage from its current home in the same building, and is a result of its growth.


The 20-year old firm, founded by partners Bruce Lazear, Michael Morosky and Ted Lape, now has a local staff of 15, including recently hired attorneys, CPAs, and executives with tax and transaction expertise.

"We've been growing like crazy," Morosky said.

The company, which has sales offices in Cleveland and Detroit and wants to expand further. It's considering additional sales offices in Atlanta, Cincinnati, Pittsburgh and Indianapolis. The new space in Columbus will give it breathing room to expand its staff further, though it doesn't have definite hiring plans.

Lazear offers services including merger and acquisition advisory, turnaround advisory, corporate finance and litigation services.

It's seen particular growth in conversions to employee stock ownership plans, or ESOPs, Morosky said. In five years, the firm has completed more than 40 major business transactions, half of them ESOP deals.


In an ESOP, the owner sells stock back to the company, which in turn allocates shares to employees. Once an employee retires or goes on disability, they're able to cash out. It keeps the company privately owned but still meets the owners' financial needs and provides a cash flow to the business.

And it's mutually beneficial – employees' stake in the company grows over time, helping with retention, while the company is also less likely to move as could happen if it's bought by someone from out of town.

Still, Lazear Capital is agnostic to the kind of transactions it does, and having an adviser has helped business-owner clients make a move on selling their businesses. That's something they are at times hesitant to do otherwise, Lape said.

"They're often worried that selling to a competitor or private equity will mean a loss of jobs or that they'll be put out of work," he said. "Our message has resonated with people. When we talk to clients about potentially selling companies, they like the concept of selling to a third party or selling to employees."

Lazear Capital’s Ted Lape On Transparency, Creativity And The Rise Of ESOPs

Lazear Capital Partners isn’t afraid to deliver bad news to business owners who want to sell.

“We do a ton of education for sellers for free because we don’t want to take money from someone who doesn’t understand what they want to do,” Partner Ted Lape says. “Sometimes we do an enormous amount of work upfront, just to tell people they shouldn’t do a deal.”

People appreciate the firm’s honesty and groundwork, and the effort often turns into referrals...

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