July 10, 2007 Teleconference
ESOP Valuations & Repurchase Liability
Featuring Robert Schweihs of Willamette Management Associates, Mike Hartman of Willamette Management Associates, Stephen Smith of Krieg DeVault LLP, and Judith Kornfeld of ESOP Economics Inc.
Telephone Dial-In Audio Conference
Tuesday, July 10, 2007
10:00am-11:40am PDT / 11:00am-12:40pm MDT / 12:00pm-1:40pm CDT / 1:00pm-2:40pm EDT
Presented by Business Valuation Resources, LLC
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ESOP Valuation and Financial Advisory Services
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Guide to ESOP Valuation and Financial Advisory Services by Robert Reilly and Robert Schweihs.
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Why Should you Attend?
One of the biggest issues today for ESOP companies is the handling of the repurchase of ESOP shares. As large as this issue is today, it will only grow in significance because:
- More ESOPs are becoming mature
- More ESOPs are moving to 100% S corporation status
So, basically, all of the stock of ESOP companies are subject to the ESOP put option which the company must honor. One very large challenge is to properly account for this contingent liability in the valuing of the ESOP shares. This session will make transparent the various valuation methods to handle this. In addition, this teleconference will explain the remedies available to ESOP sponsor companies in amending their plans to help deal with uneven demands on cash flows. Join Bob Schweihs, Mike Hartman, Stephen Smith, and Judith Kornfeld as they discuss this important topic.
- Panelist Presentation on ESOP Repurchase Liability:
- The History Of ESOP Repurchase Liability
- Why has there been great emphasis recently?
- How it was addressed in the past?
- What Will Be the Impact Of More And More ESOP Companies Converting To S Status And Becoming Tax Free?
- How Has Repurchase Liability Been Addressed In ESOP Valuation Historically?
- Plan Design: What Elements Should Go Into An ESOP That Will Impact Repurchase Liability?
- What Do You Do If the Plan Calls For Immediate Payout On ESOP Shares Put Back to the Company?
- Can you amend the plan?
- What are the rules and guidelines in doing so?
- What if ESOP shares have been allowed to leave the company with departed employees?
- What About Diversification?
- What is the history of older employees taking advantage of this?
- When Do You Get A Repurchase Liability Study? What’s In It?
- How Do You Model Repurchase Obligations?
- How would you account for recycling versus redeeming ESOP shares?
- How Does The Valuation Firm Use the Information In the Study?
- What are We Seeing Clients Do About Repurchase Liability?
- Should ESOP Firms Do Formal Studies To Determine The Optimal Capital Structure?
- Structuring ESOP Loans
- Participant Q & A
- Concluding Remarks
- Gain a historical perspective on ESOP repurchase liability and why it affects appraiser's and attorney's work
- Understand why acquiring knowledge related to repurchase liability is necessary to execute ESOP valuations properly
- Learn from a diversity of ESOP practitioners, detailing industry trends and issues impacting ESOP valuations
Robert Schweihs, ASA, Willamette Management Associates (Moderator)
Mr. Schweihs is managing director of Willamette Management Associates. He has performed the following types of valuation assignments: ESOP appraisals, merger and acquisition appraisals, post-acquisition purchase price allocation appraisals, business and stock valuations, real estate valuations and evaluations, tangible personal property appraisals, real estate feasibility and investment analyses, ad valorem assessment appeal appraisals, construction cost segregation appraisals, insurance appraisals, litigation support, forensic valuation analyses, and expert witness testimony.
Before joining Willamette Management Associates, Mr. Schweihs was involved in a variety of valuation, marketing, and administrative management positions. He was founder, national partner, and national director of valuation services for Valuation Engineering Associates, a business unit of Deloitte & Touche. Before that, he was region manager of the valuation division of Arthur D. Little, Inc.
Mr. Schweihs has a Master of Business Administration, Economics and Finance, from the University of Chicago, Graduate School of Business and a Bachelor of Science, Mechanical Engineering from the University of Notre Dame. He is an accredited senior appraiser (ASA), certified in business valuation, of the American Society of Appraisers. He is also a Certified Business Appraiser with The Institute of Business Appraisers, Inc. He is also a member of The ESOP Association and the Institute of Professionals in Taxation and a former Trustee of The Appraisal Foundation.
Mike Hartman, Willamette Management Associates
Malcolm R. (Mike) Hartman is a principal with Willamette Management Associates and directs the firm’s national ESOP practice. He is among the best known ESOP financial advisors in the country. For ESOP engagements, he provides the following services:
- Feasibility studies
- Post transaction cash flow analysis
- Transaction financing
- Adequate consideration opinions
- Fairness and solvency opinions
- Annual update valuations
- General consulting
In recent years, Hartman has spent a great deal of time working with middle market companies on issues related to management and ownership transition. He has assisted clients in evaluating the alternatives for shareholder wealth diversification and for transition to the next generation of management. Assignments often include strategic planning with CEO’s and boards of directors to develop long term business plans that will maximize value accumulation for shareholders and insure continued growth for the company.
In connection with his ESOP work, Mike assists client companies in developing and implementing equity based compensation programs for top management and other key employees. These programs are designed to insure that management’s goals are aligned with those of the ESOP. Such programs include the use of stock options, synthetic equity, performance units and stock appreciation rights.
Mr. Hartman is active in The ESOP Association, the ESOP community’s primary trade association, and serves on its Board of Directors. He is also a member of its Board of Governors and was part of the nominating committee, a group that determines the future leadership positions within the organization. Mr. Hartman received a national award for membership recruitment in 1995 after he founded the New South Chapter of that Association in 1994. He continues to direct the activities of this Chapter, including the planning and executing of regional ESOP meetings. Mike is also active in the National Center for Employee Ownership (NCEO) and speaks at many of their meetings.
Stephen Smith, JD, Krieg DeVault LLP
Since 1984, Mr. Smith has dedicated his private law practice primarily to employee stock ownership plans ("ESOPs") and structuring ESOP transactions. Mr. Smith has been responsible for structuring over 150 ESOP transactions for public and private companies. He also designs and implements equity and non-equity-based incentive compensation programs for public and private companies. Mr. Smith represents ESOP sponsors, ESOP fiduciaries, including employer-appointed "committees" and independent ESOP trustees, in ESOP transactions throughout the United States, including the sale of ESOP companies and the termination of ESOPs.
Mr. Smith is a partner with the Indianapolis law firm of Krieg DeVault LLP. He holds AB and JD degrees from Indiana University and an LLM in Taxation from Georgetown University Law Center. He is a member of the American and Indiana State Bar Associations. He is also a member of The ESOP Association and its Indiana Chapter, The National Center for Employee Ownership, Employee-Owned S Corporations of America ("ESCA") and its Advisory Board, and the Indiana Benefits Conference.
Mr. Smith was actively involved in drafting the S corporation ESOP enabling legislation contained in the Taxpayer Relief Act of 1997. He was a co-author of the S corporation ESOP "anti-abuse" legislation known as the "Breaux/Ramstad Bill." He structured the first ESOP to be sponsored by an S corporation for Liberty Check Printers of Minneapolis. Mr. Smith also structured the first ESOP to become a registered bank holding company, the Horizon Bancorp ESOP of Michigan City, as well as the purchase by an ESOP of a major public accounting firm from H&R Block.
From 1975 through 1980, Mr. Smith served on active duty with the U.S. Air Force as a Judge Advocate; from 1980 through 2001, he continued his service as a member of the U.S. Air Force Reserve and retired in January, 2001 with the rank of Colonel. For the last several years of his Reserve duty, Mr. Smith acted as a legal advisor to the Chairman of the Joint Chiefs of Staff and the Under Secretary of Defense in connection with employee benefit plan matters affecting the Department of Defense. He designed and drafted the first "401(k)" plan for members of the Armed Services and authored the related Report to Congress.
Judith L. Kornfeld, JD, ESOP Economics, Inc.
Judith L. Kornfeld is the founder and president of ESOP Economics, Inc., a firm that specializes in repurchase obligation services for ESOP companies. The firm performs repurchase obligation studies and provides consulting services to assist companies in developing strategies for managing and funding repurchase obligations. It also developed Telescope™, a software program for projecting ESOP repurchase obligations, which it licenses to ESOP companies that want to do their own projections.
Judy has been working with ESOP companies for nearly 20 years, focusing on repurchase obligation issues. She has authored many articles on ESOP repurchase obligations and is a popular speaker at ESOP conferences at both the state and national level.
She currently chairs The ESOP Association’s Interdisciplinary Advisory Committee on Fiduciary Issues. She also serves on its Advisory Committee on Finance and is a past chair of that committee. She has also served on the Board of Directors of TEA, on many committees, and as an officer of the Pennsylvania Chapter. She is also on the Board of Trustees of the Employee Ownership Foundation.
Judy received her law degree from the University of Pennsylvania Law School, her M.B.A from the Wharton School, and her B.A. in Economics from the University of Pennsylvania.
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2 Interactive CPE Credits (Consulting Services)
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