First, the Chicago Tribune, and shortly thereafter financier Kirk Kerkorian has proposed using an ESOP as part of an effort to buy Chrysler. ESOPs are now being promoted as a tax efficient way to finance leveraged buyouts. The attraction, of course, is the ability to deduct principal (and interest) and “reasonable” dividends. There was a surge of large company ESOP leveraged buyouts in the 1980s such as:
- Avis
- Simmons Mattress Company
- Dan River
- Burlington Industries
- Polaroid
Some of these ESOPs worked. Some didn’t. It’s too soon, of course, to see if we will return to those thrilling days of ESOP yesteryear. Corey Rosen, Executive Director of the National Center for Employee Ownership, puts these old transactions and the new transactions into perspective in his article, ESOPs in Mergers and Acquisitions: Wave of the Future? I also included another of Corey’s commentaries in my recent post Understanding the Tribune ESOP .