Employee Stock Ownership Plan (ESOP): A Smart and Powerful Business Succession Plan for Employers

By: Jason Muhme, regional vice president, commercial banking, Northwest Bank

An employee stock ownership plan (ESOP) is an employee benefit plan that gives workers ownership interest in the company in the form of shares of stock. As these plans have become increasingly more popular among employers, ESOPs give the sponsoring company and participants various tax benefits, making them qualified plans, and are often used by employers as a corporate finance strategy to align the interests of their employees with those of their shareholders.

ESOPs encourage employees to give their all as the company’s success translates into financial rewards. They also help team members feel more appreciated and better compensated for the work they do.

ESOP Client Success Story

Headquartered in Willoughby, Ohio, Technical Assurance, Inc. is a nationally recognized building enclosure consulting and engineering firm that manages multifacility building enclosure programs in design, construction and sustainability across the United States. In their pursuit to become 100% employee owned, the Technical Assurance team partnered with Northwest Bank on a term loan solution and working capital line of credit to support the launch of their employee-ownership plan.

“This is the single most important announcement I’ve made to our team since founding the company 29 years ago. This transition to a 100% employee-owned company feels like a natural progression for Technical Assurance. It reinforces our culture, protects our ability to serve our clients in the best possible way, and supports the sustainability of our company.” – Ed Taylor, founder and visionary, Technical Assurance

For Technical Assurance, their ESOP plan has multiple objectives: to provide ownership of the company to those who work so diligently to make the company successful, offer a significant retirement benefit to the team in addition to their 401(k) plan, and motivate, retain and attract top talent.

“Our employees take great pride in their work and solving issues for our clients, and Technical Assurance’s success is attributed to the dedication and innovation they bring each day. The ESOP demonstrates our commitment to our people, enabling them to take part in our company’s future success. We are enthusiastic about this new era as an employee-owned company and look forward to our continued growth.” – Jim Solether, president, Technical Assurance

What We Offer

At Northwest Bank, we offer a complete array of commercial lending solutions along with competitive earnings rates, returns, and treasury management services. As a trusted advisor and banker that specializes in ESOP financing, we know how to guide your new ESOP through the steps necessary to properly document and communicate the details needed for long-term success.

Our guidance and solutions for ESOP transactions include:

  • Senior Debt financing for new ESOP formations
  • Working capital line of credit to ensure access to capital post transaction
  • Streamline process with team of advisors to close deal
  • Negotiate future financing options the company may need (i.e. acquisitions, real estate purchase, equipment, etc.)
  • Provide guidance and options on refinancing the seller note
  • Wealth management advise for the selling owners