Beyond Valuation specializes in valuations for employee stock ownership plans or ESOPs. The complex and specialized nature of this determination requires the skills of an appraiser with significant experience specific to ESOP valuations.
When considering the feasibility of an ESOP for a particular company, one of the most important first steps is to retain an ESOP appraisal firm to do a preliminary estimate of the value of the company’s stock. The appraisal firm should be independent with respect to the issuing company and parties to the ESOP transaction, and should be highly experienced with ESOP valuations.
A good appraisal expert will be able to advise you on the potential impact on valuation of any structural alternatives that might be under consideration in connection with the design of the ESOP transaction, such as the issuance of new classes of stock or the use of leverage to accomplish the initial transaction.
Once the decision is made to implement an ESOP, the law requires that an independent ESOP appraiser is used to determine the fair market value of the stock to be purchased by the ESOP if it is not publicly traded. An independent appraisal minimizes the fiduciary risks to the principals of the company, and helps to assure employees that the ESOP is being operated fairly and in their best interests.
The valuation is finalized and updated immediately prior to closing so that an informed decision can be made by shareholders who are selling their stock and by the trustees of the plan who are authorizing the trust to purchase stock. The stock is then valued annually to inform the trustees and shareholders with respect to any transactions between the ESOT and shareholders, such as the repurchase of shares from the ESOT when an employee leaves the company.
TFG Strategies has vast experience related to ESOPs including:
- Serving as a financial advisor in the initial ESOP transaction,
- performing the required annual valuations for ESOP administrative purposes,
- providing fairness opinions for transactions subsequent to the establishment of an ESOP such as termination of the ESOP, amendment of the ESOP, or the sale of the company.