Mainebiz

V O L . X X I V N O. I I JA N UA R Y 2 2 , 2 0 1 8 14 I s an Employee Stock Ownership Plan the right succession tool for your company? Last year Maine businesses continued to utilize an Employee Stock Ownership Plan as a succession planning tool that both provides liquidity to selling owners and incentives to loyal employees. In recent years, several Maine com- panies in the construction industry have turned to ESOPs, including Johnson & Jordan, Landry/French, Wright-Ryan, Knowles and ReVision Energy. In general, an ESOP is a trust that holds all or a portion of the company's stock for the benefi t of employees. e owners benefi t because the trust pays them fair market value for their shares in exchange for a combination of debt and cash. Meanwhile, employees are incen- tivized to remain with the company and support its growth because they con- tinue to accrue shares in their account that may also increase in value over time. Succession planning is an impor- tant step in every company's lifecycle. A business owner must determine who will take over the management and ownership of the business. In some cases, this means that a family member will take over. In other cases, the busi- ness owners will sell the business to a strategic buyer or management. Some Maine businesses have deter- mined that ESOPs are the appropriate succession tool because of the follow- ing reasons: 1. Timing: Baby boomer business owners who ran their companies for years or decades are beginning to think about retirement, which means fi nding new owners to take the helm. ESOPs off er a unique structure where the operation of the company can transition to the next generation over time. 2. Market conditions: Private capi- tal to fund strategic acquisitions does not always make its way to Maine and New England. With ESOPs, the transaction does not require outside capital to fund the acquisition because payments to the owners can be made over time from the company's cash fl ow. 3. Tax benefi ts: Congress has implemented specifi c tax benefi ts to encourage ESOPs. If a company is a 100% ESOP-owned S-corp, it's likely that profi ts would not be subject to federal or state taxes. 4. Job protection: Many owners are concerned that an out-of-state stra- tegic buyer will purchase a company's assets and layoff all or some of the employees. In the case of ESOPs, it is likely that the company's location will remain the same and most jobs will be preserved. 5. Employee ownership philosophy: Some owners feel loyalty to their employees for making their busi- ness successful. Such owners feel that rewarding employees with the economic benefi ts of ownership is an appropriate way to reward them for their success and loyalty. Not all Maine businesses are well- suited for ESOPs. Companies with less than 10 employees or low cash fl ow may not be able to support the contributions required to operate an ESOP. Even if a business can support payments to an ESOP, there is a risk that the company is unable to support an ESOP due to market downturn. In addition, transitions can still contain pitfalls. For example, before owners retire, they must recruit and retain a strong management team to continue to operate the business. All Maine businesses should con- sider succession planning. ESOPs are one option to consider along with strategic or inside buyer. More Maine companies have undergone an intense analysis process and determined that an ESOP is right for them. D S , a shareholder at Bernstein Shur, can be reached at @ . Decide whether an ESOP the right succession tool for your company Hancock Lumber Welcomes Mainely Trusses to the Team! Hancock Lumber blazes new trail, acquires roof and floor truss manufacturing facility Engaged. Empowered. Team Hancock. www.HancockLumber.com/Culture Hancock Lumber is proud to announce their acquisition of Mainely Trusses, a market-leading roof and floor truss manufacturing facility based in Fair- field, Maine. Two successful Maine businesses are joining forces with this acquisition, giving Hancock Lumber a competitive advantage with this prod- uct line in the marketplace. Mainely Trusses is a great fit for Hancock Lumber and the acquisition em- phasizes their commitment to making wood framed construction simpler and faster for builders in Maine and New Hampshire. The addition of Mainely Trusses to Team Hancock makes them the first retailer in Maine to own and operate their own roof and floor truss manufacturing facility, with the abil- ity to provide a complete set of wood framing solutions to their customers. Kevin Hancock, CEO Manufacturing is not new to Hancock Lumber; in fact, the company's roots began in 1848 with milling logs into lumber and continues today with their three Eastern White Pine sawmills and wall panel manufacturing facility. Adding roof and floor truss manufacturing to the portfolio complements their offerings, bringing another product line direct from the manufacturer to builders. Hancock Lumber looks forward to continuing Mainely Trusses' tradition of excellence and reputation for quality and service. Kevin Hancock, CEO of Hancock Lumber, shared his excitement, "Mainely Trusses has an excellent reputation in the construction in- dustry across Maine. The company also has a set of core values that we like, admire and feel is aligned with Hancock's. People matter at Mainely Trusses and the company has high standards in terms of employee engagement and customer service. We felt there was a lot we could learn from the company and some value we could add. When the opportunity to acquire Mainely Trusses materialized we rec- ognized quickly that it would be a good long- term move that strengthened both companies." B Y D A V I D S C H N E I D E R H OW TO All Maine businesses should consider succession All Maine businesses should consider succession All Maine businesses should consider succession All Maine businesses should consider succession All Maine businesses should consider succession All Maine businesses should consider succession All Maine businesses should consider succession All Maine businesses should consider succession All Maine businesses should consider succession planning. ESOPs are one option to consider along planning. ESOPs are one option to consider along planning. ESOPs are one option to consider along planning. ESOPs are one option to consider along planning. ESOPs are one option to consider along planning. ESOPs are one option to consider along planning. ESOPs are one option to consider along planning. ESOPs are one option to consider along planning. ESOPs are one option to consider along planning. ESOPs are one option to consider along planning. ESOPs are one option to consider along planning. ESOPs are one option to consider along planning. ESOPs are one option to consider along with strategic or inside buyer.

• Cover