How is an ESOP Stock Price Determined at Sale and Annual Valuation?

For business owners who are evaluating exit strategies, the first question is often, “How much money can I get when I sell my company?” After all, getting liquidity out of the business is often a primary reason for selling to an ESOP.

The answer to this question is not always as simple as a sale price. Selling to an ESOP can involve tax benefits and sale structure advantages that can net a seller more over the long term than even a strategic premium third party offer can deliver.

An essential step is establishing fair market value for the business, which in turn determines the ESOP company stock price. The company stock price is determined on an annual basis by an independent appraiser, as required under Internal Revenue Code Section 401(a)(28)(c).

EBITDA Multiples by Industry: What Matters in an ESOP Valuation Study

A business owner exploring exit strategies or business sale opportunities wants to know what to expect to earn on the sale. That sale outcome is often expressed in terms of an EBITDA multiple as a calculation of the company’s enterprise value (EV). 

ESOP Administration: Valuation of Company Stock

One of the most important fiduciary responsibilities with administration of an ESOP is determining the fair market value (“FMV”) of the stock held in an ESOP on an annual basis and as of the specific date when stock is purchased or sold by an ESOP.

Keep Your ESOP On Track and On Time
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