April 2014 Web Extra: Example ESOP feasibility analysis

Prior to implementing an employee stock ownership plan (ESOP), S and C corporations must undergo a feasibility analysis to determine whether the company is financially qualified to do so.

In hand with this month’s cover story, “Ownership pride,” CCG Advisors provided an example feasibility analysis for a company seeking to implement a leveraged ESOP. In this example the company is a 30-year-old firm owned by a single founding shareholder. The shown earnings are $2 million before interest, tax, depreciation and amortization (EBITDA). The company’s valuation for the ESOP sale is $10 million, or five times current EBITDA.