Steps in a Buyout is no feasible way for an employee- operative which will encourage all of
owned succeed, then the buyout the employee owners to contribute
(1) Educate the supporters of the association should cease pursuing the constructively to their co-operative’s
buyout. buyout. future success.
Supporters may include all of the If there are any feasible ways for an
hourly and salaried employees as well employee-owned co-operative to (7) Arrange financing.
as local management. Frequently, in succeed, they should be identified in A feasibility study should identify the
situations involving an organized the feasibility study. The buyout capital expenditures and working
workforce, those employees protected association should select the most capital needs of the co-operative and
by a union contract are the initial acceptable alternative. At this point the these should be taken into account
proponents. buyout association has most of the when arranging financing in a addition
information it needs to complete the to the agreed upon purchase price. The
(2) Establish a buyout association. following steps. financing may include equity or
Membership in the buyout association subordinate debt, senior debt, and
is usually open to all the potential (5) Develop a Business Plan. working capital financing. Generally
future employee-owners. A leadership If the buyout association proceeds this requires professional assistance by
team is usually selected to put the beyond the feasibility study, it is your lawyer, business analyst or outside
buyout together on behalf of the buyout because the study has explained how an financial consultant.
association. Through its leadership, the employee-owned co-operative can
buyout association: succeed. This explanation with a little (8) Close the deal with the seller.
a) Raises funds from members and packaging thrown in is the business
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solicits matching funds from plan which the buyout association will
Costs
government and other potential take to potential lenders and investors.
The initial assessment of the viability
contributors; b) Contracts with and The business plan explains how the
of a worker buyout in any given case
oversees the work of legal and financial new co-operative will generate the
will be in the range of $7,500 -
consultants, and c) Develops a money to replay the bank and reward
$10,000. This would include travel
management team. the investors.
costs to an initial series of meetings for
up to two resource people, and fees for
(3) Do a pre-feasibility assessment. (6) Negotiate the purchase and their services through the pre-feasibility
This assessment is a quick study by the create the structure for the new step. If the conditions for a buyout are
development consultants of the key employee-owned co-operative. favourable based on the initial
factors needed for the buyout to The feasibility study should provide the assessment, the union would then
succeed. buyout association with a reasonable receive a project plan for future steps.
estimate of the company's value as well Additional costs, if the union decided
(4) Conduct a feasibility study. as how much debt the new co-op will to pursue the project, would vary based
A professionally done feasibility study be able to support. on the scale of the buyout. It would be
provides an in-depth analysis of the The buyout association incorporates the up to the union to decide whether to
economic viability of the plant as an worker co-operative with input from all carry out the initial assessment through
employee-owned co-operative. employees, and develops a governance the pre-feasibility stage, and then to
If the feasibility study shows that there structure for the employee-owned co- decide whether further steps are
warranted based on the results of the
pre-feasibility study.
For More Information
You can get more information on the
steps in a buyout at the following page,
from which this was adapted:
http://dept.kent.edu/oeoc/BuyoutAssist
ance/StepsinBuyout.htm
However, please note that this link will
be within the US legislative and policy
framework. Some concepts such as
“Employee Stock Ownership Plans” or
“ESOP’s” will not be as relevant in
Canada.