ESOP (Employee Stock Ownership Plan)

Definition

A qualified retirement trust that buys the company on the employees' behalf, usually with seller financing and bank debt, leaving the staff as the eventual owners.

Why It Matters

It is a rival bidder a searcher meets without seeing, because an owner who wants the team to inherit the business will take less money to get it and needs no diligence on the buyer. It is also an exit route worth knowing when you sell: the tax treatment can be favourable to a seller, and the buyer is a trust rather than a person who has to be convinced. The trade is that setting one up is expensive and slow compared with selling to an individual.