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Mid-Market Innovation: The PE/ESOP Hybrid

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January 29, 2015

We’ve heard of PE-backed management buyouts, but something new is PE-backed employee buyouts. Chicago-based Verit Advisors, which has a track record in such deals, says it’s a growing trend and an example of innovation in the mid-market dealmaking segment. According to Mary Josephs, Founder and CEO of Verit Advisors, hybrid buyers are emerging that combine the “financial firepower and operational expertise of a high-quality private equity firm” with the Employee Stock Ownership Plan (ESOP), a legal holding entity that exists in the US market.  Apparently, there is a  handful of PE players willing to either invest in businesses the traditional way, or as an ESOP-­private equity transaction.

The ESOP is evident in all kinds of industries, according to the National Center for Employee Ownership (NCEO), and stock owners include everyone from the receptionist to the CFO. The largest employee owned business in the US has 160,000 employees.
ESOPs in the U.S.ESOPs in the U.S.

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