How to Sell Your Company to Your Employees

When it’s time to move on, your best buyers may be the very ones you’ve already hired.

Bill Roark remembers the rug being pulled out from under him, in 1999, when his employer was sold to an outside buyer. Though the acquirer tried to find a job for Roark, “when all was said and done, I was on the street corner with a check and a ‘good luck’ goodbye,” he says. “I didn’t want to put anybody in that position.”

That’s why, when Roark co-founded Torch Technologies in 2002, he knew that his eventual exit strategy would be to sell the company to his employees. Roark established an employee stock ownership plan (ESOP), in which an independent trust is established to buy the owner’s stock and hold it for employees until they retire or leave. By 2011, the company’s 1,000 employees owned 100 percent of the company, and in December 2018 Roark stepped down as CEO. “I can live the life I want, and this organization can live on,” he says. “That’s more important than squeezing every possible penny out of a sale.”

Selling to employees can also minimize presale prep (the arduous work that goes into making a business more attractive for would-be buyers), and it allows for a gradual transition, says Dyanne Ross-Hanson, founder of Exit Planning Strategies in St. Paul. Founders also say that selling to the entire staff can fuel greater loyalty and productivity and seed an owner’s mindset among the rank and file.

Today, there are roughly 6,500 ESOPs in the U.S., at companies including Publix Super Markets, Chobani, and Wawa, according to the National Center for Employee Ownership (NCEO). These questions can help you figure out if an ESOP makes sense for you.