Employee Stock Ownership Plans

When are valuations required for ESOPs?

Employee Stock Ownership Plans (ESOP’s) are retirement plans designed to allow employees to invest in the stock of their company. These plans provide many benefits, including: increasing employee loyalty, providing security for employers, and providing retirement resources for employees. Determining the fair market value of the stock owned by the ESOP and its participants is necessary for the planning and management of the ESOP.

The large majority of companies with ESOPs are privately held, which means that there is no active market for the company’s stock. As a result, trustees of ESOP’s typically engage an independent business valuation firm to value the stock held by the plan.

When are valuations necessary for ESOP’s?

Valuations are used for a variety of purposes during the planning and management of ESOP’s, including:

• feasibility studies when companies are considering establishing a new plan
• the initial valuation to support the establishment of the ESOP
• annual appraisals for plan trustees to support the management of the ESOP
• valuations to support the termination of the ESOP

Why use BVI?

When it comes to ESOP’s, BVI specializes in valuations—we do not provide any other ESOP-related services. This keeps us completely independent and allows us to remain objective when valuing ESOP’s for our clients.

BVI has completed many valuations of firms owned by ESOPs. Our experience, technical expertise, and credibility in presenting well documented valuation reports to both the IRS and Department of Labor are some of the primary reasons that BVI is the firm of choice for plan trustees.

Who can benefit?

ESOP plan trustees benefit from using a qualified, independent business valuation firm that has experience in valuing ESOP ownership interests and discussing the valuation with examiners from the Department of Labor, if necessary.

Individual plan participants benefit from quality valuations by having an accurate price for the ESOP’s shares, using: (1) appropriate valuation methodologies, and (2) the facts and circumstances of both the company and the ESOP.

The company’s senior management also benefits from having an experienced valuation firm that can efficiently use its time and resources when preparing the valuation.

Tax Planning and Compliance Valuations | Estate and Gifting | Financial Reporting Valuations
Employee Stock Ownership Plans | Purchase or Sale of Interest | Sale of Company