Employee ownership has emerged as one of the main ways of creating asset-building opportunities – an economic priority in light of the wealth disparity in the United States. Employee ownership generally occurs through an employee stock ownership plan (ESOP) or in the form of worker-owned cooperatives. Yet there are fewer than 400 worker-owned cooperatives in the countryand the incubation of new worker cooperatives has limitations in terms of scale and reach. 

Conversions of existing businesses to employee ownership via an ESOP transaction are relatively better known and more frequent, resulting in distributed ownership on a much larger scale. Where are the true opportunities to create more broad-based ownership and asset building for workers? 

 the worker-owners of the new belgium brewery

the worker-owners of the new belgium brewery

A staggering number of healthy, successful businesses are about to undergo a succession process, with baby-boomer owners gearing up for retirement – a generation that owns 2.34 million businesses.  While some transitioning businesses may be shut down, sold to competitors, relocated, or taken over by private equity funds, some retiring owners may prefer a situation in which the company – and, relevantly, its employees – continue to thrive. This provides a great opportunity for worker ownership and subsequent asset-building for the workers of these enterprises.

The strategy of exiting to employees is still relatively uncommon, though growing, with New Belgium Brewery and Real Pickles providing inspiring examples. So why don't we see more of them? Among the factors that hold back a succession via conversion are the financial terms, the availability of financing, and the real or perceived difficulty and time-consuming nature of a conversion.

Project Description

The above barriers to conversion to worker ownership could be lowered by designing an intermediate actor – a private equity acquirer who can buy the company from the exiting owners and shepherd it to worker ownership. Such a model could help preserve the jobs and the place-based benefits of businesses rooted in community. It would also provide current owners a way of exiting while continuing a legacy of economic impact in their communities. , and the mission of enterprises with stated impact,

We are currently exploring what such a vehicle could look like by asking:

  • What kinds of businesses (by size, industry, geography, etc.) are better positioned for conversion? More willing to do so?
  • What would the upside look like for workers and for investors (monetary gains from productivity boosts, tax advantages, higher retention, etc.), and where would the risks lie?
  • How can it avoid over-leveraging the business at exit and put the well-being of the workers at its center?
  • Who are the actors, from investors to experts in conversions, that could play a role in bringing to life such a vehicle?

While there have been conversion success stories well documented by DAWI and Project Equity, we believe there has not been an intermediary equity vehicle specifically aimed at facilitating conversions in a succession context. This project will require innovative financial modeling as well as technical knowledge and assistance for a new conversion mechanism. As an experimental model, it could provide new avenues for PRI and MRI strategies, popularize conversion as an exit strategy for retiring baby boomers, and foster the ultimate goal of asset-building for the workers and their communities. 

If you are interested in worker ownership, financial models for succession, and the valuation of employee-owned companies, we'd love to hear from you. Please send us a note at