With ESOP, business owner and employees can both benefit
Succession issues are a constant topic of conversation in Maine. With baby boomers looking to retire and/or bank some equity from their businesses, there are a lot of “for sale” signs on businesses.
ESOPs have the advantage of tax deferment and, in some cases, financing from an interested party, the owner. Employees have a greater stake in the success of the business. For the wider community, local ownership keeps companies based in Maine.
In this issue, Senior Writer Lori Valigra met with the founder of Johnny's Selected Seeds, Rob Johnston Jr. Johnston started the company with $500 in 1973, at age 22. In 2005 an ESOP was put in place and, by 2012, employees owned the entire company. Today, Johnny's has 210 employees, including seasonal workers, and annual sales of $40 million. This is only a small, but intriguing aspect of Lori's story, which is a good read.
In recent months, Mainebiz has written a number of stories about companies selling to employees through an employee stock ownership plan, or ESOP.
In January, Kennebec Technologies owner Charles “Wick” Johnson started the ESOP process, selling his Augusta business to his 65 employees. An ESOP was a way to keep the company locally based. “I conferred with our board. I did not want to sell the company [outright]. Local ownership goes away. Company after company has confronted that,” Johnson told Mainebiz at the time.
GAC Chemical Corp. in Searsport made the plunge in 2015, following the lead of Moody's Collison Centers, with eight Portland-area locations; Sebago Technics in South Portland, Cianbro in Pittsfield, Prock Marine in Rockland, Allen Insurance in Camden, Sargent Corp. in Stillwater, SteelPro Inc. in Rockland. As of this writing, VIA Agency in Portland was in the process of making the transition to an ESOP.
An upcoming discussion devoted to ESOPs
Looking ahead, Mainebiz will offer what I think will be a timely and compelling event.
As part of our Mainebiz Executive Insights series, we will host a discussion on ESOPs on June 16, from 7:30 to 10:30 a.m., at Bowdoin College in Brunswick.
Panelists will include David Colter, CEO of GAC Chemical Corp.; Susan Scherbel, founder of Bellview Associates, which has facilitated many of the ESOP conversions in Maine; and Mark Adams, president and CEO of Sebago Technics. Steve Tenney, senior vice president of wealth management at UBS, will moderate the discussion.
Read more
Landry/French joins the growing ranks of Maine ESOP businesses
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