Successful ESOPs

Employee Ownership – Capitalism At It’s Best

General Technology CorporationEmployee ownership in the form of Employee Stock Ownership Plans (ESOP) have existed since the early 1970’s. Unfortunately the majority of press coverage surrounding businesses with this type of ownership tends to concentrate on the failures rather than the successes. True North Business Navigation Professionals are working to change that.

General Technology Corporation(GTC) was incorporated in New Mexico and located in Albuquerque in 1981 by a local resident businessman, Ralph Anderson. The business was initially capitalized at $1/share. After years of profitable growth and expansion the company grew from $1.1 million in revenue in its first year to $13 million in 1994. Mr. Anderson and one other shareholder decided in 1995 to establish an Employee Stock Ownership Plan for the purpose of selling all the GTC stock. The plan operated for the first three years as a prefunded plan until October, 1998 when 100% of the shares were sold. The purchase price at the time was established by an ASA certified business appraiser at $240/share.

After an unprofitable year following the purchase the employee owners did what most owner/entrepreneurs would do in this situation. They took the corrective actions that were necessary, which included: employee pay deferrals, reduced retirement benefit contributions, selling off an unprofitable operating division, changing banks, refinancing debt, and relocating to a new and improved facility. Each and every one of these corrective actions were difficult but that’s what business owners do, “make difficult decisions”.

In November, 2002 the trustees of the GTC ESOP voted to sell the outstanding stock to a company listed on the New York Stock Exchange. The employee owners realized a share price of $963. In just four years of employee ownership from 1998 to 2002 a stock appreciation of 401% was realized for approximately 195 employee owners. That’s capitalism!

Is an ESOP a good fit for your company?

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