STAR Transaction & Investment ExamplesThere are a number of reasons why business owners choose to partner with Long Point Capital, such as achieving liquidity while preserving the identity of their business, accomplishing succession planning, accessing growth capital, or tapping into resources for continued growth, to name a few.
We have learned through years of working with mid-size companies and entrepreneurial management teams how to be good partners. We support business owners and management in a collaborative effort to profitably grow a company and increase its equity value.
We also pioneered the Structured Tax Advantaged Recapitalization ("STAR") transaction structure for the U.S. middle market, which combines an ESOP (Employee Stock Ownership Plan) and an LBO (Leveraged Buyout) to provide unique advantages to entrepreneurs seeking liquidity. The STAR structure complements our 15+ years of successful history in recapitalizing middle market companies with entrepreneurs. While many private equity firms avoid leveraged ESOP transactions, we have developed an expertise in structuring and executing these types of transactions. As a result, we are highly-regarded throughout the ESOP community.
Key benefits of the STAR transaction include the following:
- Tax Savings — Allows the Seller to defer or avoid the capital gains tax, generating over 40% more after-tax proceeds than a traditional LBO.
- Cash Flow — Reduces or eliminates corporate income taxes, providing more discretionary cash flow for growth, debt pay down, or current payments to investors.
- Employee Motivation — Creates an employee benefit plan with substantial value through an ESOP.
- Seller Legacy — Publicized as a sale to the employees, not as a sale to a private equity group.