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Nicole Miller is one company that has done an employee stock-ownership plan.
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Apparel firms searching for liquidity might want to consider transferring a portion of company ownership to an employee stock-ownership plan.
Companies such as R&M Richards, Briefly Stated and Nicole Miller have all done ESOPs.
"The ideal candidate for an ESOP is a company where its owners want to take some money off the table, but not lose control of the company to an entity that doesn't know the business," said Andrew Jassin, managing director at Jassin-O'Rourke Group LLC.
An ESOP is a vehicle owners should consider if they are looking to partially cash out of a company, he said. Owners who do the transaction can use the money for any purpose and, under existing law, receive some favorable tax advantages, as well.
Certain apparel firms are ideal candidates for the ESOP vehicle. "These are companies that have great businesses, but the trademarks aren't of the type that would attract a top buyer willing to pay a premium," Jassin said. "Many are private label businesses where they have great customer distribution, but can't be sold for the multiple that the owners expect."
ESOPs were first enacted by Congress in 1972. An estimated 20 million American workers own stock in their companies through some plan, either an ESOP, 401(k) or via a grant or option, according to the National Center for Employee Ownership. The largest study on ESOPs in public companies was done in 1999 by Hamid Mehran, then of Northwestern University. He found that ESOPs in 382 publicly traded companies increased the return on assets 2.7 percent over what would otherwise have been expected.
The group said that companies utilizing the vehicle perform better post-ESOP than pre-ESOP. Annual sales growth averages a 2.4 percent gain, with the annual increase in sales per employee up 2.3 percent. Although the growth figures might seem small, the national center said an ESOP firm with the same differentials projected out over 10 years would likely be a "third larger than its paired non-ESOP match."
Typically, a plan is set up through funding from a bank. The bank lends money to the company, which then lends the money to the ESOP. The ESOP, set up as a trust, takes the money and buys stock from the selling shareholders. The stock is then distributed to the employees at no charge, provided certain plan guidelines are followed.
Companies such as R&M Richards, Briefly Stated and Nicole Miller have all done ESOPs.
"The ideal candidate for an ESOP is a company where its owners want to take some money off the table, but not lose control of the company to an entity that doesn't know the business," said Andrew Jassin, managing director at Jassin-O'Rourke Group LLC.
An ESOP is a vehicle owners should consider if they are looking to partially cash out of a company, he said. Owners who do the transaction can use the money for any purpose and, under existing law, receive some favorable tax advantages, as well.
Certain apparel firms are ideal candidates for the ESOP vehicle. "These are companies that have great businesses, but the trademarks aren't of the type that would attract a top buyer willing to pay a premium," Jassin said. "Many are private label businesses where they have great customer distribution, but can't be sold for the multiple that the owners expect."
ESOPs were first enacted by Congress in 1972. An estimated 20 million American workers own stock in their companies through some plan, either an ESOP, 401(k) or via a grant or option, according to the National Center for Employee Ownership. The largest study on ESOPs in public companies was done in 1999 by Hamid Mehran, then of Northwestern University. He found that ESOPs in 382 publicly traded companies increased the return on assets 2.7 percent over what would otherwise have been expected.
The group said that companies utilizing the vehicle perform better post-ESOP than pre-ESOP. Annual sales growth averages a 2.4 percent gain, with the annual increase in sales per employee up 2.3 percent. Although the growth figures might seem small, the national center said an ESOP firm with the same differentials projected out over 10 years would likely be a "third larger than its paired non-ESOP match."
Typically, a plan is set up through funding from a bank. The bank lends money to the company, which then lends the money to the ESOP. The ESOP, set up as a trust, takes the money and buys stock from the selling shareholders. The stock is then distributed to the employees at no charge, provided certain plan guidelines are followed.
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