When Mark Lindquist purchased Rapid-Line Inc. in 1989, he completed the transaction with a strategy for exiting the business already in mind. Shortly after signing the paperwork to acquire the Wyoming-based contract manufacturer, Lindquist established an employee stock ownership plan (ESOP) to cement a clear path for his eventual retirement.
“The challenge in all small business is it’s easy to get in and not so easy to get out,” Lindquist said of his decision to implement an ESOP early in his ownership of Rapid-Line. “If you don’t have an exit plan, you’re always having that hanging over your head.” Lindquist also established the plan as a long-term strategy to reward the employees who stuck by him through the early years of the business, when the company had to rebuild after its parent company, Behler-Young, was sold in 1989.
When Rapid-Line finalized the ESOP process in June 2016, some of its long-term employees received more than $200,000 in their retirement accounts, an amount Lindquist said would have been challenging for them to earn through traditional retirement plans. Lindquist’s decision to enter an ESOP transaction echoes similar sentiments from other business owners in West Michigan who have chosen it as an exit strategy for their businesses.
Under an ESOP transaction, an owner sells the business to a trust, which in turn manages employees’ stocks in the company until workers retire. Owners can either sell their business to the ESOP outright or the ESOP can take on some debt and pay off the owner over time. Proponents say ESOPs offer business owners myriad benefits, including the ability to remain involved in the business, reward their employees and in some instances avoid paying capital gains tax. For companies, ESOPs often are better managed, more productive and experience significantly less employee turnover compared to other organizations.