October 2013

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Page 37 of 59

Ownership When family members aren't interested in taking over ownership, an Employee Stock Ownership Plan could be a viable alternative. By Joanne Costin At age 75, energetic Bruce McFadden, president and CEO of ICM of America, isn't slowing down. But he's starting to prepare for the day when he won't be heading his construction equipment dealership with seven locations in Arkansas, Alabama, Mississippi, Oklahoma, Tennessee and Texas. McFadden's sons, Mark and Chris, who also work in the business, prefer equipment sales roles to running the company, so this dealership owner has his eyes on an Employee Stock Ownership Plan (ESOP) that will enable him to take a lesser role in the company, get some equity out of the business and travel. In the next five years, McFadden hopes that his company will be at least 50 percent, if not 100 percent, employee-owned. An ESOP is an employee benefit plan that provides employees with ownership in the company. ESOPs are required by law to invest primarily in the securities of the sponsoring employer. Second, an ESOP is unique among qualified employee benefit plans because it is permitted to borrow money from the company. The ICM of America scenario isn't that unusual among family-owned businesses, according to Andrew Gibson, regional managing partner with BDO. "In a lot of situations the kids are in the business but they don't want to own the company." Other examples of AED dealerships that are 100 percent employee-owned include Modern Group and Vermeer of Texas-Louisiana. Now that the economy is on the upswing, many baby boomers are looking for a way out. "They may have missed a chance to sell the business in 2005-2006,"said Todd Marsteller, president of Stellar Partners. "They are not going to miss another chance." Gibson believes a dealer should thoroughly examine all his options for exiting a business, including selling to a strategic buyer, an IPO, a financial buyer, a management buyout, private equity firm or ESOP. "We look at the feasibility of all those options," said Gibson. "For dealerships there are not usually more than one or two." McFadden is no stranger to an ESOP. He first formed one in 1984, and two years later used it to borrow money to buy out one of his partners. Employees currently own 20 percent of the company. He first became intrigued by the idea of an ESOP from one of his contractor customers who sold 100 percent of his company to employees. McFadden was also inspired by other successful employeeowned companies in construction such as Peter Kiewit Company. "Their people work harder than the little family-owned construction companies because they have part of it," said McFadden. "I still dream of this being an employee-owned business that not only covers four or five states in the South, but grows according to (continued on page 38) 36 | www.cedmag.com | Construction Equipment Distribution | October 2013 36_ESOP_Feature_KP.indd 36 9/26/13 3:30 PM

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