Holland & Knight has added a partner with expertise in corporate transactions and employee stock ownership plans (ESOPs).
Elizabeth Perdue, who previously practiced law at Morgan Lewis & Bockius, joins Holland & Knight’s Chicago office. Perdue was a member of the ESOP practice group at her prior firm and has detailed knowledge of the structures of ESOPs as well as their benefits for companies and their personnel.
“By selling to an ESOP, the owner of a privately held company can have a tax-advantaged liquidity event without selling the company to an outside owner. You can accomplish a win-win for company, employees, and the seller by using an ESOP transaction,” Perdue commented.
Perdue described a marked growth in the popularity of ESOP transactions over the years. She said it is rare to see a tax-incentivized structure, authorized by Congress, for the purpose of encouraging the sale of a business, where the motivation is to promote employee ownership. Perdue noted that she has focused her practice not only on the structuring of ESOPs, but, in particular, on helping clients access the capital markets in order to finance these transactions.
“We have definitely seen growth, although ESOPs have gone through cycles as have other vehicles in the M&A market. When we had the credit crunch a few years ago, ESOPs were affected like other companies, but there’s been a little more stability in the ESOP market, and the statistics have shown ESOP companies to be more profitable and stable than non-ESOP companies. In addition to increased employee productivity and loyalty, there are tax benefits that can provide increased cash flow for an ESOP company to weather some of the ups and downs of economic cycles,” Perdue stated.
According to Perdue, the number of lenders, and particularly senior banks, involved in ESOP lending has risen exponentially. Perdue drew a contrast between the present and how things stood as recently as the early 2000s.
“Compared to about 15 years ago, you’re seeing a substantial increase in the number of lenders who are knowledgeable and interested in entering the field. There has also been growth in the number of private equity firms becoming knowledgeable in this space, both for use as an exit vehicle for some of their portfolio companies and as an investment strategy,” she said.
“You have to structure ESOP transactions carefully to maintain the tax and employee benefits, but we’ve seen growth in interest and knowledge on the part of private equity firms as well as some non-bank financial institutions. But in terms of financing sources, it’s still primarily a play for the senior banks at the moment,” Perdue added.
Along with Perdue, Holland & Knight gains senior counsel Louis Joseph, a former associate solicitor at the US Department of Labor.
Perdue holds a JD from the University of Chicago Law School and a BA from Pomona College.