ESOPs for Healthcare

A Private Equity Alternative

Employee stock ownership plans enable closely-held healthcare providers and companies to sell equity, at fair market value, to an employee trust.

Staff do not pay out of pocket. Instead, ESOP sales are financed transactions. Think of it as an internal leveraged buyout.

In addition to continued autonomy, employee-owned firms gain meaningful tax breaks and efficient tools to expand or transfer ownership. Meanwhile, selling shareholders can defer capital gains burdens on their proceeds.

How Does an ESOP Work?

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Who is the buyer?

A trust representing at least 10 employees.

Who sets the price?

The price is negotiated with an institutional trustee, based on an independent valuation.

How is it funded?

Commercial and/or seller financing, paid-off with pre-tax corporate cashflow.

Who gets shares?

Full-time employees are allocated shares proportional to their annual compensation.

How is stock earned?

A portion of all shares is allocated annually; the shares vest within 3-6 years.

How do employees cash out?

Vested stock is sold back to the company, at a current valuation, when employees depart.