Your Exit Options: ESOP’s vs. Private Equity & Strategic Buyer Feat. Kelly Finnell | Ep. 157

If your exit options only include strategic buyers and private equity, you’re missing a third choice. On this episode of The M&A Mastermind Podcast, host Nick Olsen welcomes Kelly Finnell, founder and president of EFS ESOP Consultants in Memphis, Tennessee. Known across the industry as “The ESOP Coach,” Kelly has spent more than 45 years focused on employee stock ownership plans. He explains how an ESOP works as a buyer, how the deal is financed, and why it’s one of the most tax-efficient strategies in the tax code. He also clears up common myths, including the ideas that ESOPs pay less than private equity and that employees end up running the company.

In This Episode, You’ll Learn:

  • How a 1979 summer research project led Kelly to build a career focused on ESOPs
  • The three things an ESOP is: a buyer, a retirement plan, and a tax strategy
  • How ESOP deals are financed with bank debt and seller notes, and how sellers are often fully paid in three and a half to four years
  • How sellers can defer capital gains tax under Section 1042, and why a 100% ESOP-owned company pays no federal income tax
  • Which owner goals point toward an ESOP and which point toward a market sale
  • Why ESOPs can pay more than private equity, based on 45 years of Kelly’s own deals
  • Why employees do not run the company in an ESOP, and how governance actually works
  • How ESOP valuations and negotiations differ from a traditional M&A deal
  • When to raise the ESOP option, including as a last resort when market offers fall short
  • What’s in an ESOP feasibility analysis, including stock appreciation rights (SARs) for key employees
  • Kelly’s three screening criteria: $2M+ adjusted EBITDA, 35+ employees, and a strong management team to take over

About the Guest:

Kelly Finnell, J.D., CLU, AIF, is the founder and president of EFS ESOP Consultants (Executive Financial Services), a national ESOP consulting firm based in Memphis, Tennessee, that he started in 1981. Known as “The ESOP Coach,” Kelly has spent more than 45 years helping business owners design and complete ESOP transactions. He wrote “The ESOP Coach: Using ESOPs in Ownership Succession Planning” and has given more than 300 presentations on ESOPs across the U.S. and internationally. He graduated magna cum laude from the University of Memphis and its law school. Learn more at execfin.com or connect with Kelly on LinkedIn.

About the Show:
The M&A Mastermind Podcast provides actionable insights and effective strategies tailored for dealmakers in the lower middle market. Hosted by Nick Olsen, the show features conversations with leading industry experts who share valuable knowledge on topics such as industry intelligence, deal management, collaborative successes, and specialized expertise. Listeners who support small to medium-sized business owners will find practical tactics and advice they can immediately apply to advance their mastery in mergers and acquisitions.

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ESOP’s are the Ultimate Win-Win Feat. Jeremy Huish | Ep. 26

Join host Nick Olsen as he delves into the world of ESOPs (Employee Stock Ownership Plans) with expert Jeremy Huish, Vice President at Corporate Transition Consulting. In this insightful episode, Jeremy shares his vast experience and knowledge, offering invaluable insights into how ESOPs can be an option in the realm of M&A (Mergers and Acquisitions).

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