Gary Gray is a partner with Tenor ESOP Partners, where he leads the group’s construction practice and helps business owners design successful exit strategies while empowering employees through employee stock ownership plans (ESOPs).
He also serves president and chief consultant at ESOP Consulting Group, providing expertise in post transaction communication and implementing employee ownership culture.
Previously, Gray was the founder and CEO and Graydaze Contracting, a national painting and sealants contractor. Under his leadership, Graydaze grew from a residential painting business in Georgia to one of the top-five largest U.S. painting contractors, with headquarters in Atlanta and Salt Lake City.
In 2017, Gray transitioned Graydaze into an ESOP, fostering continued growth and creating uncommon success for the employees. Today, the company generates $120 million in revenue, ranks as the second-largest painting and coating contractor in America, and has been recognized among Georgia’s 40 fastest-growing companies and the Inc. 5000 list for the fastest-growing companies in America.
Gray’s extensive experience in construction and employee ownership makes him a trusted advisor for companies seeking sustainable success through ESOPs. He serves on a number of ESOP boards and is a Certified Exit Planning Advisor (CEPA).
In a recent podcast episode of the CoatingsPro Interview Series, Gray offered his perspective on seven key benefits of ESOPs. A summary of those is available here, with further commentary available by listening to the complete interview at the base of this article.
Benefits of ESOP Exit Strategy
Many private business owners and shareholders have their wealth locked up in their businesses, Gray explains. As retirement and/or succession planning becomes a consideration, a leveraged sale to an ESOP may be the best option.
A leveraged ESOP can provide the following benefits, according to Gray:
• Selling shareholders can receive fair market value for shares they sell to an ESOP.
• Selling shareholders can receive significant cash at closing, with the specific amount determined by the company’s ability to obtain financing.
• Selling shareholders may permanently defer capital gains taxes on the transaction. Currently, those consist of a federal rate of over 23.8% plus applicable state taxes.
• Regardless of the amount of interest sold by selling shareholders, they can retain control of the business post-closing, or vest control in a management team (which may include family members).
• The post–closing ESOP company receives significant tax deductions, thereby enabling it to reduce or eliminate corporate taxes.
• Employees earn a windfall of retirement benefits over time, even without using their own money to fund the plan.
• A “second bite of the apple” is formed consisting of a significant amount of synthetic equity, which goes to the selling shareholders and key employees.
These types of transactions may be customized to meet the specific strategic and financial goals of each selling shareholder. Additional resources to learn more about the benefits and limitations of these transactions are available here.
Gray offered additional insight on these topics during a recent episode of the CoatingsPro Interview Series. To hear the complete podcast interview, listen below.
For more information, contact: Gary Gray, (404) 849-0244, [email protected] and [email protected]
