We know that as a business owner you don’t like to pay taxes. If you could eliminate your capital gains tax when you sell your company, would you and your advisors want to learn how to make it happen? We think so.
We have developed a tax-efficient alternative to the PE Recap. We call it the PE+ESOP Recap. It is more complicated than a traditional PE Recap, but it could significantly increase your proceeds from a deal.
How do we do it? The PE+ESOP Recap combines a traditional PE Recap with a standard ESOP (Employee Stock Ownership Plan) transaction. We generate the capital gains tax savings utilizing the Internal Revenue Code 1042 rollover. This traditional ESOP transaction has been used thousands of times using only bank financing for capital. We have just added private equity capital into the transaction to provide more liquidity. Please read some of the publications in the Additional Information section on the right to learn more about it or look at our ESOP Financing section.
We offer you a choice. We will provide you a detailed analysis of how each structure meets your goals and you can choose the transaction that fits your needs.
In a simple example, let’s assume that the market price for your company is $100 million and your capital gains rate is 30%. In the below chart, we show you how in each scenario your $100 million of proceeds would be split between the cash you keep, the cash you pay in taxes, and your reinvestment in your company.