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Expert Editorial: Craft Your Legacy in the Spirit of Employee Ownership


Looking for an exit? Consider an Employee Stock Ownership Plan (ESOP).

By Carter Smith

When a business owner considers their succession options, they usually assume their best option is to either transfer ownership to reliable family members or sell to a third party, such as a competitor or private equity. However, an alternate sale option is an Employee Stock Ownership Plan (ESOP). As part of an ESOP transaction, the selling shareholder can receive meaningful liquidity at closing, which is funded by a third-party loan to the company, with significant opportunity for additional value realization in the future.

While selling to a third party can be appealing because it may offer a high sale valuation and the potential for cash at close, it poses risk to the existing management team, employee base, physical locations, branding and community engagement the seller worked his or her lifetime to build. These options each carry significant pros and cons, as well as tax implications and, post-transaction with the seller mostly out of the picture, significant risk for the business and its long-term success.

An ESOP is a qualified retirement plan that offers employees the opportunity to build equity account balances over time without any out-of-pocket costs. An ESOP can let the selling shareholder maintain the independence of the company and the legacy that they have worked hard to build. In addition, an ESOP can be an attractive option for business owners who want to include family members in the ownership structure.

For business owners in the wine and spirits sector, who have successfully built their companies with a valued workforce and who are looking for an exit strategy that will ensure the forward momentum of their businesses, an ESOP may be appealing. 

The ESOP structure has been particularly successful in the craft brewing industry, with New Belgium Brewing being the most notable example. New Belgium Brewing implemented an ESOP structure in 2012 and, when it sold to Japan’s Kirin Holdings in 2019, it provided significant retirement balances to its employees, letting them share in the company’s success. Craft brewers and many other companies have gravitated to the cultural and financial benefits of the ESOP structure for three key reasons.


The craft brewing industry is fiercely independent and was founded in response to ubiquitous product from multi-national brewers. Maintaining independence isn’t just important to a company’s brand and identity, it also impacts customer retention and revenue. Craft beer drinkers choose their brands based on quality ingredients, characteristic brewing techniques and the value of supporting local business.

“Selling out” to institutional players can be seen as counter to the very movement from which craft brewing was born and could potentially lead to a loss of customers and revenue.


Preserving legacy is more than just securing jobs and careers for employees. It’s keeping a business in its community and maintaining goodwill with the people who live there. It’s preserving the unique recipes, brewing/distilling processes and industry relationships that made the business successful to begin with. With the same management in place as stewards of your products and your brand, it’s keeping your vision alive; with an ESOP aligning employee goals with company goals, your vision can thrive.

Tax Advantages

The potential tax advantages of an ESOP cannot be overstated. In a 100% S-Corp ESOP structure, a company pays no federal or state (in most states) corporate income tax. The ESOP is considered a tax- exempt entity under federal law. This tax advantage lets the company reinvest its profits into the business, pay down transaction loans and invest in growth. In addition, there may be opportunities for tax deferral on the sale proceeds for the selling shareholders (based on specific eligibility).

These tax advantages can make an ESOP an attractive option for business owners looking to sell their company while minimizing their tax liability and ensuring the long-term success of the business. However, it’s important to note that the rules and regulations surrounding ESOPs can be complex, and it’s important to work with experienced professionals to ensure the transaction is structured in a way that maximizes the benefits for all parties involved.

A recent example that ESOPs can be a viable business succession option is the Brewing-Science Institute (BSI), a Colorado-based yeast manufacturer and supplier to breweries and winemakers worldwide, which recently sold the company to its employees through an ESOP structure. On March 2, BSI founders David Bryant, Bryan Pearson and Corina Maldonado announced the sale to BSI employees.

BSI employees celebrate an ESOP
BSI employees celebrate an ESOP

Selling Your Company? Consider What’s Most Important

Many different motivations can come into play when deciding to sell your company. If you value factors such as the impact of a sale on your local community or the employees who have helped build your company, an ESOP may be a compelling alternative to consider.

For many business owners, determining the best exit strategy can be a complex and stressful challenge. Owners should engage with an ESOP expert to carefully walk them through the process and to understand their full range of options. Doing so will unlock value for all parties while ensuring a strategic and equitable path forward for employees.


Carter Smith

Carter Smith is a vice president with ButcherJoseph & Co.’s investment banking team. He has been involved in a variety of transactions including mergers and acquisitions, valuation advisory, and leveraged recapitalizations. His investment banking experience includes engagements for a broad range of industries including brewing, healthcare, insurance, and homebuilding. 

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