ESOP Valuation: Repurchase Obligations

The days of the repurchase obligation are here. As employee stock ownership plans (ESOP) age, and as the economy picks itself up from recent turmoil, new valuation challenges are arising in assessing the viability of ESOP plans. At the heart of the issue is the ability of the company to exercise "put" options as defined in their ESOP. As Jared Kaplan explains, though these transactions are "financially neutral," they can have serious consequences on the operation and growth abilities of the issuing company, and, in turn, its value and its ESOP.

In "ESOP Valuation: Repurchase Obligations" Kaplan and Robert Gross examine how the confluence of aging ESOPs and the current economic environment has created a new burden on appraisers to master the art of valuations for ESOPs. This thorough review of the careful balancing act of current and future repurchases is a must for anyone operating in this expanding valuation space.

This program is eligible for self-study CPE credit

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Program Agenda:

  • The economics of ESOP Repurchase Obligations
    • Structure & organization
    • Financial, fiscal, and fiduciary impact
    • Repurchase obligation issues as a result of the economic environment
    • Impact of repurchase obligations as ESOPs age
  • Repurchase Obligations and their effects on valuation
    • Funding demands on cash flow
    • Operations, growth, and liquidity problems arising from repurchase obligations
    • Impacts of ESOP design
    • Impacts of ESOP management
  • The valuation feedback loop
    • How repurchase obligations affect value and vice versa

Learning Objectives:

  • Define a repurchase obligation and its legal and economic implications for an ESOP issuer
  • Identify economic and regulatory factors that are affecting repurchase obligations and the values and valuations of ESOPs
  • Associate the functionality of the issuance and repurchase of employee stock with impacts on value
  • Define judicial decisions and other obligations that affect appraisers and other financial professionals when appraising or otherwise examining ESOP plans

CPE Information

Prerequisites: Knowledge of Business Valuation
Program Level: Advanced
Preparation Required: None
Delivery Method: QAS Self-Study
Recommended CPE: 2 (Specialized Knowledge & Applications)

Business Valuation Resources, LLC is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website:
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