up from account executive to president by 2018 . Jillian Bender-Cormier , brand manager , joined in 2008 , and Alison Bender , account executive , in 2011 . Chris Bender , the nephew , came on in 1996 and is vice president of benefits .
By 2017 , as CEO , Bender was ready to sell his stake as majority shareholder . He wanted to turn his shares over to that rising generation , but there was a problem . How does a majority shareholder get a fair price for growing the company while making the numbers work for those younger leaders ? Those executives are usually in their prime earning years , but it ’ s difficult for them to buy out a majority shareholder in a company worth millions of dollars with payments over a short period . The math doesn ’ t add up .
The alternative was for Bender and the rest of the ownership group to sell to an external buyer . The insurance industry is consolidating fast : In 2018 , there were more than 600 insurance mergers and acquisitions in the U . S . and Canada , a record . But selling a company that ’ s been owned locally since 1938 to an outside buyer could have big downsides , including possible layoffs , which often accompany mergers and acquisitions .
Bender Insurance Solutions ’ board of directors discussed forming an ESOP as a solution but were skeptical . Bender-Johnson was “ not a huge fan ,” she says , fearing employee ownership would mean losing operating control of the company . She knew of an insurance company in the Bay Area that used an ESOP to let a retiring owner cash out all at once , and that created a huge debt load for that firm .
So Bender-Johnson spent 18 months learning all she could about ESOPs . She talked to local employee-owned companies like Tesco Controls . She attended a national ESOP conference , making friends with leaders of insurance companies that had one . She met with an attorney who specializes in ESOPs and put together a feasibility study .
That projection showed that shareholders would make a big financial sacrifice in an internal sale via an ESOP . In an external sale , the price is whatever the market will bear , and strategic buyers — those in the same industry looking to capture market share through a merger or acquisition — are willing to pay a premium . By contrast , in an ESOP sale , an independent appraiser sets the purchase price . In Bender Insurance Solutions ’ case , if the ownership group decided to sell to a strategic buyer , they could have received three times more than in an ESOP sale , Bender-Johnson estimates .
There were other costs that came with an employee sale . They would need to hire an external trustee to run the ESOP , and they would have to pay $ 30,000 for the trustee ’ s attorney plus $ 30,000 for their own attorney . The expense and the partial loss of control to a trustee gave Bender second thoughts .
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November 2020 | comstocksmag . com 63