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Human Resources

established vehicle that the ski industry clearly doesn’t the funds. By the time it’s down to two owners, they each
know very well yet. This is a great option where you can own 50 percent of the business, and it’s become nearly
have a liquidity event for the owners while still allowing impossible for either of them to get out without selling the
some or all of the ownership partners to stay involved. whole thing.
And then of course you’re also helping to take care of the Another problematic scenario is when a family owned
beloved employees in ways that can be harder in other ski area is gifted to the owners’ children—and one of them
kinds of sales.” wants to stay and run the business while another wants to
According to Phil DeDominicis, managing director sell it and cash out, creating family conflicts and possibly
of investment banking for Menke, there are many ways to resulting in sale of the property.
structure an ESOP and many reasons for wanting to do it, “Why not sell some or all those shares to an ESOP?” said
including obtaining liquidity for some of the sharehold- DeDominicis. “Now you don’t need to find a buyer. You may
ers or buying out all the owners. “With an ESOP, you’re still want to, down the line, but you don’t have to do it now.”
essentially creating a private market for the shares without In addition, 100 percent ESOP-owned S corporations do
having to sell the entire business. Management stays in not pay corporate taxes (federal and most states) because the
place, the employees stay, and the name stays on the door,” company’s one shareholder is a tax-exempt retirement plan,
he said. DeDominicis added. “In the US there are some 11,000 busi-
DeDominicis describes a common scenario in succes- nesses with ESOPs, with 12.9 million participants and $1.2
sion planning (or the lack thereof) with multiple owners: trillion in assets,” he said. “An ESOP is clearly a popular
Say there are five owners, and each owns 20 percent of option for a lot of companies”
the business. The first owner wants out, but it is hard for Good candidates for an ESOP have strong management
everyone to scrape together the extra 5 percent each to buy teams and generally produce consistent, predictable finan-
him out, particularly if they haven’t been planning for it. cial results. There’s also the advantage of reducing employee
When the next (now 25 percent) owner wants out a few turnover. When employees have skin in the game, they’re
years later there’s an even bigger challenge to pull together more likely to contribute beyond their stated job description,
and less likely to move on.
Despite all the advantages of ESOPs, however, they
aren’t for everyone. Some publicly held companies are not
New name, always good candidates because the ESOP contributions
typically increase retirement expenses and reduce earnings,
new look, which in turn may negatively affect the stock value in
jittery public markets. That said, public companies are
same trusted increasingly using ESOPs for a host of reasons, said Black
Diamond’s Stewart.
advisors. Establishing and overseeing an ESOP can be compli-

cated, given the legal, accounting, and administrative issues.
SRR is now STOUT. Further, federal regulations governing ESOPs are complex,
and the cost of establishing and maintaining a plan is greater
The adventure of owning and operating a company
is one that calls for a partner you can count on for than other types of retirement plans. That’s where it pays
strong guidance and deep expertise. For more than 25
years, companies have turned to Stout for innovative to consult with advisors such as Stewart and DeDominicis
financial advisory, capital markets, financial planning, (both of whom will be at the NSAA Convention and
and valuation solutions.
Tradeshow in Scottsdale) to help weigh the pros and cons of
For more information, contact:
Joshua J. Fox, Managing Director an ESOP for a resort’s specific situation.
+1.646.807.4232 For those areas that do meet the criteria—and are com-
jfox@srr.com
mitted to making it work—the ESOP model is likely to be
a good fit. At least that’s the case at Massanutten, where the
Investment Banking
Valuation Advisory people who run the area each and every day are the ones that
formerly
Dispute Consulting stand to gain the most from its success.
Management Consulting
SRR is a trade name for Stout Risius Ross, Inc. and Stout Risius Ross stoutadvisory.com Colin Bane is an action sports and adventure travel writer
Advisors, LLC, a FINRA registered broker-dealer and SIPC member firm.
based in Denver, Colo.

12 | NSAA JOURNAL | CONVENTION 2017