ESOP Valuation & Advisory

ESOPs are a type of employee benefit/retirement plan that allows employees to become partial owners of the company they work for by acquiring shares of the company’s stock. By providing employees with an ownership stake in the company, companies can better align the incentives of their employees with the long-term success of the company.

In planning for, implementing, maintaining, and terminating an ESOP plan, regular qualified business appraisals are required to ensure that the ESOP pays fair market value for company securities.

Trustees have a fiduciary responsibility to plan participants (i.e. company employees) to ensure that the ESOP pays adequate consideration (which is generally defined as fair market value) for any transactions involving company securities.

ESOP plans are governed both by the Department of Labor (DOL), through the Employee Retirement Income Security Act (ERISA), and the Internal Revenue Service (IRS) and as such, business appraisals for ESOP related transactions are subject to the highest level of scrutiny.

It is essential that ESOP valuation advisors be aware of the nuances associated with ESOP valuations including adequate consideration, fair market value, and prohibited party transactions to name a few to avoid potential issues down the road in the event of a DOL or IRS audit. Having the DOL and/or IRS disqualify the ESOP can have significant ramifications for trustees and plan participants and beneficiaries.

Trustees regularly engage with us for their most important ESOP transactions because of our attention to detail, unmatched experience, and unparalleled responsiveness to their time sensitive needs.

Each member of our ESOP valuation team has significant experience performing ESOP valuations and is aware of the specific nuances associated with ESOP valuations. In addition, members of our ESOP valuation team held leadership positions as national practice leaders of the ESOP valuation groups of nationally known valuation firms.

In addition, we are intimately familiar with each of the service and process agreements that the DOL has put in place with ESOP trustees and regularly review and update our valuation models and reports to ensure that they are in compliance with the latest and greatest updates from the DOL and ESOP legal community regarding recent DOL litigation.

Furthermore, we take a very proactive approach with our trustees as a trusted advisor and regularly communicate with our ESOP trustee clients regarding how key decisions made at the company level may impact subsequent ESOP valuations.

Finally, we are active participants within the ESOP community and regularly attend the annual and semi-annual ESOP conferences put on by The ESOP Association (TEA), the National Center For Employee Ownership (NCEO), and other ESOP-focused groups and organizations. Members of our team serve on the Advisory Committee on Valuation of the The ESOP Association and members of our team are regularly invited to speak at national ESOP conferences.