ESOP Leveraging

This is the most powerful way to fund a share plan. It is also the original way in which ESOPs were designed. The idea is for the ESOP to borrow funds from a third party and with these to acquire shares in the employer’s company on behalf of the participating employees.

The Leveraged ESOP is the most powerful ESOP type available.  It is new to Australia, but common in the UK and USA.

Because the ESOP is ‘leveraged’ it is very effective for buying employees a significant stake in the firm and paying for it in a comparatively short time.

The leveraged ESOP is an ideal tool for an employee buy-out or buy-in.  It is well suited to ‘succession planning’ providing retiring owners a way of selling the business to their employees.

This is how a Leveraged ESOP looks: 

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