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In this episode of Markets Plus, Chad Armstrong, Managing Director & Head of East Region for Investment Banking, BMO Capital Markets, moderated an expert panel that breaks down the pros and cons of ESOPs, private equity partnerships, strategic sales, and IPOs. The panelists included:
Leah Turnbull, Managing Director & National ESOP Practice Lead, BMO Corporate Advisory
Carol Barnhart, Co-Chair of Miami Corporate Practice & Shareholder, Greenberg Traurig
Luis Zaldivar, Co-founder and Managing Partner, Avance Investment Management
Check out the ~23-minute episode:
Markets Plus is live on all major channels, including Apple and Spotify
Below is an excerpt of their key topics.
Chad: The M&A market has been very active in 2025 and plenty of large deals have taken place. My first question is for Leah and how companies look at business transitions. Others can chime in as well.
Leah: Every privately held business at one point or another will have to transition ownership. Either there's a retirement, the business owner wants to pursue other interests, or there's a death. It happens in every company, and especially in today's market where a large percentage of business assets and privately held businesses are held by individuals age 50 and above. A full transition of ownership falls into two main categories: (1) Selling to a third party, which could in include selling to a financial buyer, such as private equity or selling to a strategic buyer such as a competitor or someone else in the vertical that you're in; (2) an internal sale, where you could sell to your employees, such as an ESOP, an Employee Stock Ownership Plan. On the ESOP front, the two words that resonate with business owners that sell to an ESOP are liquidity, which you can obviously get by selling to a third party, but also legacy.
Chad: How do people think about that right path and what are the steps they take? When do they start thinking about it?
Leah: Be honest with yourself and write down what are your priorities for yourself personally, and what is that timeline? What are your priorities for your company? And what is that timeline? And then how do your employees fit into that calculus? I've talked to a lot of businesses and valuation's always a big factor. Some of these companies or business owners think there's a lot of more upside for their company and they can take this $10 million EBITDA business to an $18 million EBITDA business for instance. If that's true, you need to ask and work with your board to discuss potential acquisition targets. Do you have the expertise in house to manage these acquisitions? Can you integrate them? And if the answer is yes, you could sell later. If the answer is no, you don't know if it's going to happen. The earlier you have those conversations, the more flexibility you have. I've had many conversations with 80 plus year old people. In short, you either make the decision, or your state will make the decision because we're all mortal. It’s better to be in control of the path.
Luis: I think what Leah's is referring to is the concept of the second bite of the apple. If you do feel like there's more upside to your business and you bring in a partner and capture that second bite by selling a portion of your business. A private equity firm can provide some of the resources that can help you achieve that next level, and then you can grab that second bite by a strategic buyer for example. There is a generational wealth transfer occurring and a generation baby boomers is transitioning their businesses. We’re also seeing a lot of younger entrepreneurs tapping capital markets who want to de-risk the business and get some liquidity while getting additional experience and scaling their operations. All reasonable reasons to bring on a partner. Now, you do need trusted advisors because selling your business is not something that typically entrepreneurs do often, and it's complicated. You need to have financials in order including audited statements. You need to have your legal advisors and be ready to enter a process of diligence.
Carol: People usually value a private equity partner coming in because it's not only the capital, but also the synergies and cost improvements that they bring. Owners know what they know, but a new partner may come in and say: Have you considered doing your business this way? Sometimes a lot of value is unlocked, and the M&A process is usually beneficial for that.
Chad: There's a lot of options to pursue and we didn't touch on going public an option or selling to family offices.
Leah: Family offices typically have a much longer investment hold period and could holding an investment 20 years to 30 years, or even indefinitely.
Luis: Valuations generally are based on three factors. One is the general market conditions, that's interest rates, inflation, tariffs, lots of things that are coming at all of us that impact the general market. Now that market impacts, then the availability of and the cost of capital. Secondly, you have industry specific, and that's basically investors interest in investing in that particular industry. Thirdly, it is a company specific. How's the company positioned in its industry? It’s about the strength of the management team, the company's growth trajectory, its margins, and all of those other factors. You kind of put all that stuff in a blender and you come out with a valuation. There are valuation ranges, and then you're either on the low end of that range or the high end of that range. Maybe you're an outlier for one reason or another.