ESOP Success Stories
1. Consulting Firm, California: $4,500,000
First American Bank’s long term relationship with this customer began with the financing of the 82% purchase of the company through an ESOP. We structured the request through a combination of a term note and line of credit sweep facility to take advantage of the company’s strong cash balances and cash flows to aggressively retire the ESOP debt. This was completed without requiring personal guarantees of the selling shareholders or assignment of the qualified replacement property. This structure and rapid debt repayment allowed the flexibility to finance three acquisitions during the course of our relationship, totaling more than $5,000,000; allowing management to continue to grow the business.
2. Manufacturer, New Jersey: $12,000,000
This transaction required First American Bank to refinance a combination of existing ESOP debt as well as liquidate the seller notes from the original ESOP financing transaction originally used to purchase 53% of the company stock. First American Bank additionally financed a mortgage to buyout the selling shareholders’ interest in the building partnership. Over the course of our relationship with the company, we’ve provided more than $24,000,000 in financing support to the business for a variety of needs including the purchase of customer lists and, most recently, the buyout of the ESOP, allowing every employee to realize the success of the company through a cash payout.
3. Consulting Firm, New York: $25,000,000
The financing support for this company was somewhat unique given the compensation structure put in place for its employees following the transaction. The strength of this company’s business is the distinctive talents of its employees, so after the 100% purchase of the company through an ESOP, management put together a combination of warrants and phantom equity to reach a level of compensation to attract and retain talented individuals. The company’s success forced the stock price, and the corresponding liability associated with its phantom equity, to increase substantially over the first few years of the plan. We were able to work with the company during the recession to structure an additional $10,000,000 in cash flow financing to buy-out a portion of the phantom equity and cut off the growth of the liability, saving the company millions of dollars in future cash outlays.