ESOP opportunities knock
Article Abstract:
Corporate finance directors can use employee stock ownership plans (ESOPs) to fund running share schemes with existing shares and avoid diluting earnings per share. There are two types of ESOPs in the UK: discretionary trusts that can borrow from company or bank and schemes designed to distribute shares to employees. The UK Companies Act of 1989 introduced specific tax relief for ESOPs and allows companies to guarantee an ESOP's external borrowing, thus reducing its interest charges. A company can buy its own shares through an ESOP and avoid creating new shares that dilute the value of current shareholders' stock holdings. ESOPs offer corporate finance directors flexibility in designing share related awards. ESOPs also create a large block of stockholders with an interest in the long-term prospects of the company.
Publication Name: Accountancy
Subject: Business
ISSN: 0001-4664
Year: 1990
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Management buy-outs after the boom
Article Abstract:
The majority of management buyouts in the UK are in the ten to 100 million pounds sterling range, but achieving independence through ownership is not an easy process. The problems managements interested in a buyout face include: high interest rates; vendors no longer give management preferential bid treatment; and increased competition. The response of the buyout financiers to these problems include: exporting skills via European buy-outs; extending product lines through buy-ins; and improving financial structures. Developments in the buy-out field include: European activity; alternative transactions, such as the start-up of copy-cat businesses; and increased leverage through mezzanine financing.
Publication Name: Accountancy
Subject: Business
ISSN: 0001-4664
Year: 1989
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Engineering added value
Article Abstract:
Financial engineering can provide large returns for equity investors in the case of a buy-out. Through astute use of debt and equity, financial engineering will increase the proportion of total return on the acquisition. Equity returns are the result of a good funding structure, and debt enhances equity returns due to the fact that interest payments are tax deductible. Debt as a fixed commitment magnifies equity returns.
Publication Name: Accountancy
Subject: Business
ISSN: 0001-4664
Year: 1989
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