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Employee stock ownership programs, commonly referred to as
ESOPs, provide a means to transfer ownership to employees,
while giving tax-advantaged liquidity to shareholders.
Congress has enacted important tax incentives for the
creation of ESOPs to foster employee participation in the
ownership of businesses. While many mezzanine capital
providers avoid financing leveraged ESOPs, Merit has
developed an expertise in providing mezzanine capital in
these situations.
The use of mezzanine capital as a means of financing an ESOP
carries many of the same benefits achieved in non-ESOP
transactions. Key benefits of using mezzanine debt in
conjunction with an ESOP include the following:
- Sellers of a business can defer the gain on the sale
of their investment by selling to an ESOP.
- Companies that sponsor ESOPs can deduct their
ESOP-related principal and interest payments from
taxable income and thereby reduce their tax liabilities.
- Beyond the tangible tax advantages for the sellers
and the company going forward, a company that uses an
ESOP may also profit from enhanced employee productivity
resulting from employee ownership.
- Merit has worked with many types of ESOPs including
those with 100%, majority and minority ownership
positions in their companies.
Merit has provided ESOP financing to a
number of companies. For further detail on specific
examples, click on the case studies below:
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