FVC2413. Advanced Topics in ESOP Valuations

Valuation advisors play a vital role throughout the lifecycle of an employee stock ownership plan (ESOP). During the formation process, valuation advisors work with a trustee team, including legal counsel, to develop an appraisal of the subject company, negotiate the terms of the transaction, and issue a fairness opinion. Once established, valuation advisors complete an annual appraisal to set the share price for plan administration and redemptions in the normal course of business. At each step of the lifecycle, valuation advisors are required to consider ESOP specific regulations promulgated by the U.S. Department of Labor, the fiduciary duty of the trustee, and the impact of a leveraged buyout on the future cash flows of the subject company. 

This session will discuss what valuation experts should expect and consider when evaluating ESOP Transactions such as:

• The role of valuation services at each step of the ESOP lifecycle.
• Common reasons for the dissolution of an ESOP and the implications for both sellers and buyers.
• The roles of each member of a “trustee team.”
• Common pitfalls or sticking points during the negotiation process.
• Common adjustments to consider when valuing ESOPs (e.g., officer’s compensation).

Learning Objectives:

• Differentiate between a valuation for an ESOP formation transaction and a typical business valuation.
• Identify what constitutes a well-rounded fairness opinion that protects both the trustee and valuation advisor.
• Distinguish important considerations when completing annual appraisals once the ESOP is established.
• Identify how valuation advisors can most effectively work with trustees and legal counsel.