Founded in 1992 by senior executives with entrepreneurial, line operating, and bulge bracket investment banking experience.
During the month of March 2010, Avalon, as the sole placement agent, raised Frederick's of Hollywood Group Inc. $3mm in common stock and warrants.
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| Does an ESOP (an "Employee Stock Ownership Plan") really help private business owners as well as provide a significant employee benefit plan? |
Yes, ESOPs can provide business owners with personal cash liquidity or asset diversification on a tax deferred basis while retaining management control of the business. At the same time, an ESOP creates a significant employee benefit program which is subsidized by very substantial tax and financing advantages. The benefit program creates employee ownership that creates a worker incentive, fosters retention and provides assets for retirement. No taxes are due on the accumulating benefits until the employee receives distributions from the plan.
An ESOP plan can borrow from a lender to purchase from 30 to 100% of owners' shares for cash creating liquidity or tax deferred asset diversification for the owners. The company guarantees the loan but the lender gets a tax break on the interest so the loan terms are generally attractive. Avalon can assist with both an independent valuation of a fair sale price and arranging for an appropriate lender. All payments by the company of principal and interest on the loan are tax deductible to the company as are any dividends on stock held by the ESOP so the government is subsidizing, effectively, half of the payout to the owners. Employees acquire ownership in a share of the ESOP as the loan is paid down but are not taxed until they actually receive distributions from the ESOP, perhaps as part of their retirement income.
The foregoing is a general summary of a complex tax and accounting program and should not be relied upon in whole or in part. Consult legal, accounting and tax advisers for guidance as to detailed provisions, alternatives and appropriate documentation.
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