At Executive Financial Services, we often talk about the strategic power of Employee Stock Ownership Plans (ESOPs), but one client story stands out as the perfect example of why timing, tax strategy, and vision all matter when evaluating exit options. In the video below, EFS President Kelly Finnell shares a real experience with a Memphis-based client—one of the top five companies in the country in its niche—who was approached by the largest competitor in their industry about a possible acquisition.
During the meeting, the competitor made a strong offer, backed by a surprising claim: they would pay the entire purchase price in cash at closing. Our client was skeptical—how could a similar-sized competitor afford to do that? The answer was simple but powerful. Ten years earlier, the competitor had established an ESOP, which enabled them to operate tax-free as an employee-owned company. Over time, they had used the resulting tax savings to build a sizable war chest, positioning them to grow through acquisition.
Rather than sell, the Memphis-based company saw an opportunity to chart its own path. On the flight home, the CEO turned to his team and said, “We’re not going to sell to those guys—we’re going to do what they did.” Fortunately, the company’s CFO had recently attended one of Kelly Finnell’s seminars on ESOPs for CPAs and still had the materials. Within six months, they became a 100% ESOP-owned company, choosing long-term independence, tax efficiency, and employee ownership over a conventional sale.
Drew Bringhurst
Vice President of Client Engagement
dbringhurst@execfin.com
www.execfin.com
901.496.0930
