For over 20 years, First American Bank has provided financing to employee-owned companies in Illinois, Wisconsin, Florida and beyond that are creating, or have established, Employee Stock Ownership Plans (ESOPs). Reach out to our team for more information on ESOPs.
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 we helped to finance 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.
Consulting Firm, Oregon: $4,000,000
This firm’s employee base is primarily made up of highly educated individuals who develop a substantial amount of intellectual property during the ordinary course of their consulting work. In addition to trying to finance a second stage transaction to bring the ESOP from a 24% shareholder to a 69% shareholder, the company was also looking to preserve cash flow flexibility to continue to invest in multiple potential new lines of business centered on that intellectual property. The initial ESOP transaction was completed without bank financing; however, the company had grown rapidly since then, causing a sharp uptick in the total valuation of the business as well as the subsequent financing needed for the buyout. First American Bank was able to provide a financing package that allowed the company cash flow flexibility to continue to invest in new business lines, while providing the founder with a substantial cash payment on day one.
Logistics Firm, Tennessee: $10,000,000
This 100% ESOP transaction structure included financing from three different parties: First American Bank, the selling shareholder and a third party mezzanine lender. It was important to the selling shareholder to receive a certain level of cash at closing that was in excess of typical senior bank financing standards, so being able to work seamlessly with the third party mezzanine lender was key. While introducing an additional lender into the fold typically adds substantial time and cost, we were able to navigate the closing process on a timely basis with, not only the selling shareholder, but also a third party mezzanine lender. This helped to ensure the former owner was able to receive the initial cash payment necessary to complete the transaction and the company had a debt structure in place that would allow it the ability to continue to succeed moving forward.
