Most EO sales occur with no down payment from the new employee owners, so EO becomes a net new benefit for those employees. There is also some risk reduction in ESOP and EOT sales by virtue of the new trustee who will watch out for the employees' interest in structuring the deal.
Most EO sales occur with no down payment from the new employee owners (with the exception of worker co-ops that have a typically nominal equity buy in). So EO becomes a net new benefit for those employees. There is also some risk reduction in ESOP and EOT sales by virtue of the new trustee who will watch out for the employees' interest in structuring the deal.
For a leveraged EO buyout, an underwriter will want to gauge the commitment and motivation of employees, as buyers. The degree to which employees are trained on how to think like owners (seeing the "big picture" and how all the pieces of the business all fit together), and understand the recent performance of the business, will influence how prepared those employees are to begin assuming greater responsibilities, and likely satisfy the underwriter.
To prepare for a culture of ownership, best practices such as Open Books Management help with increasing the commitment and motivation of employee-owners. Companies such as Optimax (which is now an EOT) were focused on building a culture of ownership years before transitioning the business, and this included features such as:
- Profit sharing
- Work-life balance
- Physical and emotional wellbeing programs
- Personal growth
- Career development
- Effective team communication
By the time Optimax was considering EO, it was essentially a "no-brainer!"