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Drew Oestreicher, senior vice president and senior client advisor at Spinnaker Trust in Portland, and Colleen L. McCracken, a strategic business advisor at CLMC LLC.
Updated: February 21, 2022
Focus on Wealth Management
Exit ramps: From buyouts to ESOPs, retirement takes many different routes
File Photo / Jim Neuger
Brett Wickard, founder of Bull Moose, sold the company to employees through an ESOP.
By Peter Van Allen with Laurie Schreiber, Jessica Hall
Retirement is complicated enough. But trying to find the right time to retire when you have spent your working years running your business can add another layer of complexity.
Recently we’ve seen some interesting exit strategies.
Last fall, in a “how to” column in Mainebiz, Drew Oestreicher, senior vice president and senior client advisor at Spinnaker Trust in Portland, and Colleen L. McCracken, a strategic business advisor at CLMC LLC, put forth a startling statistic.
They wrote that while 96% of business owners agree it’s important to have an exit strategy, only 13% of those business owners actually have a written plan in place — “leaving,” they wrote, “too much unknown for what comes next.” Succession planning requires just that — planning.
For many independent and/or family owned businesses in Maine, there are generally three options for succession, or retirement, Oestreicher and McCracken wrote.
- Pass it onto the next generation: Even if family members want to take over, are they ready? Since ownership and leadership are different, you can get creative by giving ownership to the next generation and having an outsider run it.
- Sell to an outsider: This can be an individual, a private equity firm, or a strategic buyer.
- Adopt an Employee Stock Ownership Plan (ESOP): As an exit option that will yield full market value, many companies choose to share the benefits of ownership with their employees.
As they wrote in the “how to” column, “an upfront valuation [of the company] is essential for providing a real potential value to an outside buyer and ensuring it meets the owners’ financial needs and expectations.”
A buyer or investor is going to look at current market rates, an upward trajectory of revenues and EBITDA (earnings before interest, taxes, depreciation, and amortization) and a solid management team in place for a “seamless transition.”
“The best time to sell is when the company is growing, the bottom line is growing and there is consistent growth and attractive prospects for the future,” Oestreicher and McCracken wrote.
With that in mind, here are a few recent examples of business sales.
Weighing the options: Sale to outside buyer or to employees?
Late last year, Day’s Jewelers, a Portland-based retailer founded in 1914, said it transferred ownership of the family-owned business to its 120 employees under an employee stock ownership plan.
At the time, Day’s described the ESOP as a significant, built-in retirement benefit. Employees were not required to make an out-of-pocket contribution to the plan, yet would have a long-term vested interest.
“When considering the future of the company, we weighed the options of selling to an outside buyer or selling to our employees. By converting the business to an ESOP, the future of the business would be kept in the hands of our employees, we could keep our current leadership, and the amazing Day’s family culture we have built,” said Kathy Corey, former co-owner of Day’s, said when the ESOP was announced in November.
Day’s joined a number of other high-profile ESOPs in Maine, including Cianbro, Moody’s Collision, Clark Insurance, ReVision Energy, Sebago Technics, Haley-Ward and others.
The National Center for Employee Ownership estimates there are 6,600 employee stock ownership plans in the U.S., covering more than 14 million participants.
Day’s, founded by the Davidson brothers in Portland in 1914, at one time operated 21 jewelry stores across northern New England. Today, the retailer has eight stores in Maine and New Hampshire, as well as an e-commerce website. Kathy and Jeff Corey, natives of Fort Kent and Madawaska, acquired Day’s from the founders in 1988.
“Becoming an ESOP and placing our future in the hands of our tremendous employees, will ensure the continued success of the company and culture we’ve built over the past several decades,” said Jeff Corey, former co-owner and vice president of marketing.
A retailer ‘bullish’ on ESOP model
Another Maine retailer took a similar path with the ESOP model.
Bull Moose, a retailer of music, books and pop culture items that’s been around for three decades, became an employee-owned company in December. It has 11 stores in Maine and New Hampshire and 140 employees.
Under the changeover, founder Brett Wickard became the interim CEO and chair of the board of directors.
Wickard said he laid out three goals for the sale: To build a platform for employees to have more control and input into company operations, to create financial security for their future and to provide more earning opportunities.
“As we’ve grown over the decades, it’s always been a collaborative effort. Our team is local, loyal, and hardworking and together we’ve built one of northern New England’s greatest brands from the ground up. I’m very proud of what we’ve accomplished,” Wickard said.
“Maintaining local ownership will continue Bull Moose’s mission to connect, inspire, and entertain folks with our inexpensive, fun, collectible stuff.”
Eligible employees were granted stock ownership by Bull Moose’s ESOP Trust, which owns 100% of Bull Moose after buying out Wickard. Employee owners are now represented by an ESOP committee, to whom the board of directors will report.
The move towards an ESOP began in January 2020, when Wickard said he began weighing the future for Bull Moose. The pandemic hit and slowed down the transition plans but the ESOP plan got back on track last fall.
He weighed other options for the company, such as a sale, but that didn’t seem to fit the Bull Moose vibe, he told Mainebiz at the time of the ESOP announcement.
“If I sold it to another company, we couldn’t control how it would be operated and it wouldn’t feel like Bull Moose,” Wickard said at the time. “It’s all about local control and community stores and we wanted that same kind of feel to continue.”
Wickard started Bull Moose in 1989 while a student at Bowdoin College. From one small store selling CDs and tapes, Bull Moose grew to 11 stores selling a large variety of pop culture items.
The edge the company had over Blockbuster and dominant retailers of the time came down to cultivating a community.
“We quickly realized that our edge is community,” he says. “So really paying attention to what people are buying and who’s buying it. And we adapt.”
Wickard has a separate company, FieldStack, that he’ll continue to run. It’s a Portland-based retail management software company that Wickard founded in 2014. FieldStack is experiencing rapid growth as retailers look for full-service partners to help them grow profitably.
“I’m all in on FieldStack. We have a goal of growing 40% percent, year over year, for the next two years. There are great opportunities ahead of us right now. Retailers really are reconfiguring how they operate and FieldStack is at the center of that. We want FieldStack to grow as smartly and aggressively as we can,” Wickard said.
A restaurant chain’s exit strategy
A recent deal may also end up in some form of employee ownership, but it’s now out of the former owners’ hands.
Sam’s Italian Foods, which is based in Lewiston, was sold to a New York-based company, Teamshares, which buys small companies and then converts them to employee ownership.
Terms of the deal were not disclosed. Until recently, there were 14 locations — two in Auburn, five in Lewiston, and one each in Augusta, Brunswick, Dixfield, Freeport, Lisbon Falls, Rumford and Topsham. The Freeport site closed late last year, citing staff shortages, but is expected to reopen.
Photo / Courtesy Of Sam’s Italian Foods
Sam’s Italian Foods was sold to a New York firm that intends to convert the business to employee ownership.
John Boyan, a Teamshares broker who is now president of Sam’s, said the goal was to keep the legacy and culture intact.
The restaurant chain dates to 1939, but the most recent owner (and seller), Richard Michaud, had worked there with his wife, Wendy, since 1988. He took an ownership stake in 2001 and bought the chain in 2003. They plan to retire.
“Rick and Wendy were adamant about not selling it to just anybody. They had something they were proud of,” broker Dennis Wheelock of KW Commercial/Magnusson Balfour told Mainebiz when the deal went through in early February.
Wheelock said he’d been contacted by Michaud in Spring 2021 about finding a buyer. Boyan of Teamshares responded to the listing in late summer. A deal came together by mid-October and it closed Dec. 1.
Michaud said he and his wife liked the Teamshares model.
“We liked that they represent the ability and the desire to grow the company and take it to its next level,” he said. “We liked that they’re going to bring growth opportunities for team members.
“Restaurants are struggling with staffing across the country. We were no different during this period. But Teamshares has an employee ownership model that’s been very well received and it should be a useful tool to stabilize staffing.”
Teamshares is a venture-backed firm founded in 2019.
“Our three founders started the business because they wanted to make employee ownership the future for small business,” said Boyan.
The company works with business brokers to find likely candidates.
Boyan said Teamshares looks for solid revenue, operating histories of over 10 years, a retiring owner and stable workforce.
Teamshares founders tried to address a need in the market, focusing on the small business owners who don’t have a natural succession, either to family or an employee that wants to buy the company.
“[Teamshares founders] wanted to find a buying solution for them. And they saw that a lot of employees have been with these businesses for a long time and are potentially the natural successors, but are unable to buy the business themselves,” Boyan said. “So they created Teamshares to buy the business on behalf of employees.”
The concept is similar to ESOPs, or employee stock ownership programs. “The ESOP structure has been wonderful for many businesses and employees in the U.S.,” he said. “But because of the complexity and cost, ESOPs are most useful for companies that are much bigger. Teamshares has developed a much simpler model of employee ownership.”
He added, “Our goal is for everyone to succeed. We believe that business success should be a win-win for everyone involved, including customers, employees, stockholders, and the larger community.”
To date, Teamshares has partnered with more than 30 companies in a variety of industries across the U.S. Teamshares itself has about 70 employees who work remotely across the nation.
Sam’s is the company’s first acquisition in Maine.
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