Employee stock ownership programs, commonly referred to as ESOPs, provide a means to transfer ownership to employees, while giving tax-advantaged liquidity to shareholders. Congress has enacted important tax incentives for the creation of ESOPs to foster employee participation in the ownership of businesses. While many mezzanine capital providers avoid financing leveraged ESOPs, Merit has developed an expertise in providing mezzanine capital in these situations.
The use of mezzanine capital as a means of financing an ESOP carries many of the same benefits achieved in non-ESOP transactions. Key benefits of using mezzanine debt in conjunction with an ESOP include the following: