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W W W. M A I N E B I Z . B I Z 13 O C T O B E R 2 1 , 2 0 2 4 initial evaluation of conceptual ideas, performing due diligence stage, pre- paring the ESOP documentation, closing, implementation and on- going compliance and employee owner communication; • Assembling an ESOP-experi- enced team of advisors, including consultants, attorneys, accountants, bank, third-party administrator, inde- pendent valuation expertise, exter- nal ESOP trustee for transaction and so on; • Financing the purchase of shares; • The financial modeling of the conversion and the ongoing busi- ness operations; • New business, compliance, legal, and accounting complexities. "For us," St. Peter continues, "the biggest challenge but also the most rewarding is the continuous learning and strategizing around the ESOP model. e concepts associated with ESOPs can be very different from typical business operations. Prior to our ESOP conversion, we worked diligently to establish a successful business operation, strategic plan, team of advisors, and overall business rhythm. e pre- and post-ESOP conversion timeframes introduced tremendous changes in our business operations. We are five years from the initial conceptual discussions and four years from the closing, and we are still learning and integrating this knowledge into our business, strate- gic and compliance planning." St. Peter says it was "an initial steep climb in knowledge" Haley Ward has made a number of acquisitions in the past few years, including the addition of out-of-state firms. So it needed a structure that could easily adjust as the firm grew. "Developing effective ESOP knowledge f or leaders and al l employee owners has provided the biggest challenge for us as we con- tinue to provide exceptional techni- cal consulting services to our clients, provide a best place to work for our employee-owners and expand into new regions to meet our growth goals," St. Peter says. "While an ESOP conversion will not be the best fit for all companies, it has and will continue to play a sig- nificant role in our business success which directly rewards our employee- owners for the business success." W hile starting an ESOP might be a trend, there are many pros and cons to making that decision. Two Maine businesses shared their thoughts on the big- gest challenge of becoming an ESOP. Founded in Brunswick in 1989, Bull Moose sells vintage vinyl records, CDs, movies and books through 11 stores in Maine and New Hampshire. Bull Moose said in Januar y 2022 it had been sold to its 150- plus employees. That month, Bull Moose became 100% employee- owned and created an Employee Stock Ownership Plan for eligible employees. Shawn Nichols, president and CEO, says, "One of the biggest challenges in becoming an ESOP is how little any of us knew about the process of ESOP governance or valuation requirements … the learning curve was steep." "The last three years have been an amazing education for us all, finding our balance in a way that supports organizational growth and ultimately rewards our employee-owners," says Nichols. When asked what can ease the challenges, Nichols says that spending time with other ESOP leader s and attending ESOP events can help, especially when it comes to learning new processes. "There are plenty of resources and other leaders willing to help you understand how to turn your team of employees into a new culture of employee-owners," he says. Another southern Maine busi- ness cited a costly, but rewarding process of switching to the ESOP structure. Ethos|VONT, a Westbrook-based, employee-owned branding agency, was founded as a limited liability partnership in 2000. Glenn Rudberg, Ted Darling, Tom Gale and Judy Trepal were involved in creating the company. Darling, who is chief financial officer, said the process of becom- ing an ESOP took five years. "We began a strategic planning process in 2012. We've always been long-term planners [the four original partners] and were focused on what happens after we retire, how we retire, how we bring forward the next generation of leadership," says Darling. "We explored ESOPs early on in that process and we dismissed it at the time, largely because of how we understood it." In 2016, the company was intro- duced to Bellview Associates, an Ellsworth-based firm that provides high-impact strategic and financial advisory services to ESOP-owned corporations. "While working with Bellview, we decided that creating an ESOP would allow us to stay with the company for the next five to seven years and help build a transition in ownership from us at the time to the employees," says Darling. At the time, the biggest chal- lenge was understanding the ESOP, how it would be structured, what it would mean in terms of gover- nance and the potential cost. "It cost us nearly a quarter of a million dollars to become an ESOP, basically to go through the pro- cess, legal fees, trusting fees, con- sulting fees, etc.," says Darling. "At the time, we were doing around $10 million in revenue and maybe generating a million in profit, so a quarter of that profit was being allocated to fund the ESOP. "That is hard for business own- ers to say, 'OK, is this something that we want to do?'" he notes. "I think coming to terms with what the structure will look like as we move from a partnership to a more corporate structure and then building a board of directors and a trustee committee." Challenges turned into opportunities B y A l e x i s W e l l s P ROV I D E D P H O T O / C O U R T E S Y O F B U L L M O O S E P ROV I D E D P H O T O / C O U R T E S Y O F E T H O S / VO N T F I L E P H O T O Denis St. Peter is CEO of Haley Ward Inc., a Bangor firm that became an ESOP in 2020. Shawn Nichols, CEO of Bull Moose, a retailer of vintage goods that has 150 employees. Ted Darling, CEO of Ethos/ VONT, warns companies thinking about an ESOP to be prepared for up-front fees and costs.

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