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TRAINING AND EDUCATION FOR EMPLOYEE BUYOUTS

TRAINING AND EDUCATION FOR EMPLOYEE BUYOUTS. Dan Bell (dbell@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. About the OEOC Since 1987.

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TRAINING AND EDUCATION FOR EMPLOYEE BUYOUTS

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  1. TRAINING AND EDUCATIONFOR EMPLOYEE BUYOUTS Dan Bell (dbell@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

  2. 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/

  3. 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/WhenEOMakesSense.htm

  4. Education for Seller: Why Employee Ownership • Diversify Concentrated Wealth • Flexible Multiple Year Transition Out • Tax Savings vs Strategic Buyer Price

  5. Education for Seller:How 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

  6. Education for Seller:Design Issues • Administration Cost vs Tax Savings • Potential Conflict of Interest as Trustee • Repurchase Liability • Employee Benefit vs Ownership Culture

  7. Education for Buyers • Steps In a Buyout • Factors to Consider • How ESOP or Cooperative Works • Design & Structuring Issues

  8. 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!

  9. 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?

  10. 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

  11. LOAN A Bank LOAN B PAYMENT ESOP Company Original Owners Stock Employees How Do ESOPs Buy Stock? Employee Owners

  12. LOAN A Payment Bank Retirement Contribution ESOP Company LOAN B Payment Employee Owners How Do ESOPs Repay the Loan?

  13. Retirement Contributions Individual Accounts Company How Do I Get Stock in My Account?

  14. Individual Accounts (Uses ESOP Allocation to Repay Loan and Receive Released Shares) Suspense Account (Holds Shares as Collateral on Unpaid Portion of ESOP Loan) How Do I Get Stock in My Account?

  15. Education for Buyers: Design & Structuring Issues • Wage Concession / Pension Rollover • Shared Governance • Individual vs Group Interests • Future Employees – Also Owners? • Equity Partners

  16. OEOC Web Site Resources • http://dept.kent.edu/oeoc/BuyoutAssistance/StepsinBuyout.htm • http://dept.kent.edu/oeoc/BuyoutAssistance/PreliminaryFeasibility.htm • http://dept.kent.edu/oeoc/BuyoutAssistance/KeyQuestions.htm • http://dept.kent.edu/oeoc/commonwealthbrochure.pdf • http://dept.kent.edu/oeoc/BuyoutAssistance/WhatIsESOP.htm • http://dept.kent.edu/oeoc/BuyoutAssistance/CreatingAnOwnershipCulture.htm

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