TRAINING AND EDUCATION FOR EMPLOYEE BUYOUTS

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TRAINING AND EDUCATIONFOR EMPLOYEE BUYOUTS
Dan Bell (dbell_at_kent.edu) OHIO EMPLOYEE OWNERSHIP
CENTER Kent State University
FIFTH EUROPEAN MEETING OF EMPLOYEE
OWNERSHIP Brussels 16, 17, 18 June 2005 European
Federation of Employee Share Ownership
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About the OEOC Since 1987

• Assisted 485 companies, 93,000 employees
• Results 71 firms employing 14,000
• Cost to Taxpayers 250 per job
• http//dept.kent.edu/oeoc/

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USES OF EMPLOYEE OWNERSHIP

• Owner Driven
• Succession Planning
• Competitiveness Strategy
• Tax Advantaged Corporate Financing
• Employee Driven
• Averting a Plant Shutdown
• http//dept.kent.edu/oeoc/BuyoutAssistance/WhenEOM
  akesSense.htm

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Education for Seller Why Employee Ownership

• Diversify Concentrated Wealth
• Flexible Multiple Year Transition Out
• Tax Savings vs Strategic Buyer Price

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Education for SellerHow to Do the Deal

• Acceptable Valuation before Going Public
• Get Commitment (Vote) from Employees
• Involve Employees in Design
• Finding Experienced Professionals
• Grant Money if Job Loss Threatened

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Education for SellerDesign Issues

• Administration Cost vs Tax Savings
• Potential Conflict of Interest as Trustee
• Repurchase Liability
• Employee Benefit vs Ownership Culture

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Education for Buyers

• Steps In a Buyout
• Factors to Consider
• How ESOP or Cooperative Works
• Design Structuring Issues

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Education for Buyers Steps in Doing a Buyout

• Education about the buyout
• Establish a buyout committee
• Preliminary feasibility assessment
• Business Plan
• Negotiate sales agreement with seller
• Arrange financing
• Close deal and CELEBRATE!

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Education for Buyers Key Factors to Consider

• Is the current owner willing to sell?
• Do the employees want to buy?
• Is there enough time for a buyout?
• Is the plant competitive?
• Is competent management available?
• Is financing available?
• Will labor-management relations hinder success?

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Education for Buyers How ESOPs Work

• How Does the ESOP Buy the Company?
• How Do I Get in the ESOP?
• How Do I Get Stock in My Account?
• How Do I Get My Money?
• What Rights Do I Have?
• Voting
• Information

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How Do ESOPs Buy Stock?
Employee Owners
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How Do ESOPs Repay the Loan?
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How Do I Get Stock in My Account?
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How Do I Get Stock in My Account?
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Education for Buyers Design Structuring Issues

• Wage Concession / Pension Rollover
• Shared Governance
• Individual vs Group Interests
• Future Employees Also Owners?
• Equity Partners

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OEOC Web Site Resources

• http//dept.kent.edu/oeoc/BuyoutAssistance/Stepsin
  Buyout.htm
• http//dept.kent.edu/oeoc/BuyoutAssistance/Prelimi
  naryFeasibility.htm
• http//dept.kent.edu/oeoc/BuyoutAssistance/KeyQues
  tions.htm
• http//dept.kent.edu/oeoc/commonwealthbrochure.pdf
  
• http//dept.kent.edu/oeoc/BuyoutAssistance/WhatIsE
  SOP.htm
• http//dept.kent.edu/oeoc/BuyoutAssistance/Creatin
  gAnOwnershipCulture.htm