ESOP Holding Company Acquires Systems Integrator
While a company like QComp might usually fall outside the purview of ChannelE2E, what’s interesting is that the buyer is an ESOP (employee stock ownership plan) holding company. We’ve been seeing a pick-up in ESOP buyouts of late, most recently with Modern Technology Solutions Inc converting to an ESOP company last week.
Now, Greenville, Wisconsin-based QComp is 100 percent employed-owned through the OwnersEdge ESOP. QComp’s founder, Tom Doyle, says other companies approached him over the years with buyout offers, but none felt right.
“I was attracted to OwnersEdge because an Employee Stock Ownership Program (ESOP) rewards my employees and invests in their future,” he said. “I also liked the fact that OwnersEdge is based in the Midwest and exhibited values that I appreciate – honesty, transparency and a commitment to its employee-owners.”
QComp: Past, Present, Future
QComp, which was founded in 1990, provides robotic packaging systems, material handling systems, and automation line integration to clients around the United States and Canada. According to OwnersEdge CEO and chairman, Lisa Reardon, QComp has seen solid growth and the firm expects that to accelerate as more companies begin implementing robotic automation. “With its national scope and the range of industries it serves, QComp brings revenue diversity to the OwnersEdge portfolio of businesses,” she says.
With the addition of QComp, OwnersEdge now has four companies in its portfolio and more than 300 employees. The firm says its ultimate goal is to have eight businesses within its portfolio.
QComp will retain its name, headquarters, and all of its approximately 35 employees, while Reardon will take the position of CEO and work with the executive management team. For the past five years, Doyle has been transitioning daily operations to his vice president of sales and marketing, John Schwan, and Greg Whitney, vice president of engineer and manufacturing.
QComp and OwnersEdge have been in acquisition discussions for the past 13 months, according to a press release. As part of the new ownership structure, an advisory board will be established and QComp will adopt the OwnersEdge strategic planning process, the company says. OwnersEdge will also take over QComp’s human resources and administrative functions while handling the integration of its employees into the ESOP.
ESOP Ownership Model Pros and Cons
Of course, as we’ve discussed, there can be benefits and drawbacks to an ESOP ownership structure. Founders are often able to unlock value from their companies while employees pay no tax on the contributions to the ESOP, only the distribution of their accounts, and then at potentially favorable rates, according to Butcher Joseph & Co., an investment banking firm that tracks the industry. Indeed, one study showed that employee-owners have more job stability. But the proposition can be risky for companies with consistently weak earnings, poor internal controls, and weak succession plans.
Still, we could be on the verge of an ESOP renaissance. New legislation recently proposed could make it easier for US companies to transition to an ESOP structure. The Main Street Employee Ownership Act of 2018 is being applauded by the ESOP Association and could mean more ESOP buyouts are on the way.