Phenneger & Associates, Inc. – Your ESOP Specialists
Successful Employee Stock Ownership Plans (ESOPs) - those that provide substantial benefits to selling owners, managers, and employees - require careful planning, research, design, implementation, administration and communication. Richard Phenneger and his associates are ESOP specialists. They guide companies through a defined and carefully monitored process from start to finish. The P&A team provides consultation, facilitation, scheduling, coordination of independent professionals, financial analysis, document preparation, administration and communications. P&A helps make a complicated process understandable...and "doable."
What Sets Us Apart?
This is the question that we are often asked. It boils down to five basic characteristics: our philosophy, our sensitivity, our experience, our standards, and our approach.
Our "Win-Win" Philosophy: At P&A we think "Win-Win." Ultimately, it is in everyone's interests for the ESOP and the company to succeed. We have been fortunate to earn the respect of both owners and employees for "fairness" as we have structured ESOP transactions during the past two decades.
Our Sensitivity - It's more than just a "Deal": Many ESOPs represent the succession of a person's life creation. We handle and guide that process with care. We understand the seller - the owners and their families who have sacrificed to build, make payroll and meet the company's obligations. We are also aware of the important role that human resources play in the success of an organization. We understand the sensitive role of senior management, managers, and valued employees in the corporate structure.
Our Experience - ESOP Design is our Business: At P&A, designing and implementing ESOPs is our primary business. We have managed ESOP transactions from $800,000 to $50,000,000. We manage diverse situations and issues with both small and large companies and have the experience to deal with all of the ramifications that may arise. A testament to our success is that our clients return for further service.
Our Standards - "Absolute" for Ethics: P&A holds very high standards of ethics and due diligence. We utilize a rigorous process full of checks and balances for the ESOP implementation process. Further, we maintain a strict policy of independence with regard to business valuation consultants, lawyers, and other professionals involved in an ESOP transaction. Our firm enjoys an excellent reputation in the financial and business community for our ethics and our attention to detail.
Our "Life Cycle" Approach: When it comes to ESOPs, we view your transition to employee ownership as a process - not an event. We assist you in: (1) analysis and design of your ESOP, (2) the acquisition of financing, (3) management and implementation of the ESOP transaction, (4) employee communications and finally, (5) ESOP administration including repurchase analysis studies. In other words, we take a "life-cycle" approach."
How We Do It
At P&A every plan is custom. There are no "boilerplates" when it comes to designing successful ESOPs.
(1) Analysis and Design - Developing an ESOP
P&A's preliminary research and design process assists the client in (1) defining long-term corporate goals, (2) designing succession management incentives, and (3) articulating realistic financial projections. A sound business plan is an absolute "must" for any successful ESOP.
Establishing an ESOP as a long-term employee benefit, or utilizing an ESOP in a buyout, demands precise problem definition. What are the needs of the seller? What are the needs of management? What is the company's retention rate and corporate culture? Above all, the issues of succession must be addressed and resolved. Included in the analysis is a review of existing qualified plans. Can the company's existing 401(k) Plan and Profit Sharing Plan be utilized in financing a transaction? Should participants be given the option to direct some of their 401(k)/profit sharing money to buy company stock? These are sensitive and important questions that need to be addressed and answered.
(2) Acquisition of Financing - The Financial Memorandum
The best business plan possible will be of little value in securing an ESOP loan it if is not properly articulated. Whether the loan is to acquire all or only part of a company through an ESOP, the financial memorandum sets the stage for your negotiations with lending institutions - not only for interest rates, but loan covenants. It also defines the management team, its goals, objectives and skills. Quality, accuracy, and completeness are the cornerstones of P&A's memorandums.
Our staff is well trained in developing financial memorandums. We know the right questions to ask and we know how to express your business plan to the financial community.
(3) Management and Implementation of the ESOP Transaction
Once financing has been secured, P&A knows how to pull all the parts together to complete a successful ESOP transaction. We coordinate the design of ESOP documents, valuation of ESOP shares, any redesign of the corporate structure, the processing of all documents through actual closing, and communications with employees. This requires careful coordination with the company's officers, corporate attorney, ESOP attorney, ESOP valuator, ESOP Trustee, accountant and lending institution.
Implementation means turning research, design, financial memorandums and documents into reality.
(4) Communication to Employees
Becoming a "business owner" is one of the biggest events that can happen to an employee. Consequently, effective communication with all employees (at the right time) during the buyout process is absolutely critical. Companies ranging in size from 12 employees to over 14,000 employees have successfully used P&A's communication concepts.
(5) ESOP Administration
Whether you are dealing with a complete ESOP buyout, partial buyout (step transaction), or the establishment of a qualified plan for long-term security, proper administration and reporting is a necessary step. Administering an ESOP requires specialized training in dealing with stock allocations, treatment of dividends, distributions and forfeitures. P&A knows who is qualified to administer your plan and can assist you in your choice of an ESOP administrator. As your ESOP matures, P&A can also provide you with a repurchase analysis study that will help you plan for the repurchase of shares as employees become eligible for distributions.
Ongoing communication is also vital. Information sharing, two-way communication, and building consensus and support for company policies and programs enhance employee motivation and increase productivity. If appropriate, P&A will develop a communications package for you.
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