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Friday, 06 May 2016 09:52

Crystal Flash sold to employees through ESOP transaction

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Former President Tom Fehsenfeld sold his company to employees through an ESOP. Former President Tom Fehsenfeld sold his company to employees through an ESOP. FILE PHOTO

GRAND RAPIDS — Following a two-year preparation process, Crystal Flash has successfully transitioned to a 100-percent employee-owned company.

The Grand Rapids-based fuel distribution company’s roughly 250 employees purchased Crystal Flash in late April from longtime owner and Chairman Tom Fehsenfeld via a leveraged employee stock ownership plan (ESOP).

ESOPs provide shares to employees in a benefit plan. The shares are held in trust until those workers leave the company.

The transition to an ESOP comes as part of the Fehsenfeld family’s decision to exit the business. While the company considered a number of options as part of its succession planning, the ownership team wanted to put the company in the best position moving forward, said Tom Olive, president of Crystal Flash.

The company hired Olive in May 2015 as part of a “thoughtful, long-term program” by Fehsenfeld to transition the company into its next generation of ownership.

“It both was a way to provide a legacy for the team members that have helped to build the company over the decades, as well as stay focused on delighting our customers,” Olive told MiBiz. “It was a good way for the family to get a fair value in their exit of the company.”

Fehsenfeld will continue to serve as the company’s chairman.

As a leveraged ESOP, Crystal Flash’s employees borrowed an undisclosed sum from Mercantile Bank to purchase the company instead of the owner contributing stocks to the employees, as is the case in a non-leveraged ESOP.
Grand Rapids-based Charter Capital Partners and Warner, Norcross & Judd LLP advised Crystal Flash on the process.

ESOPs have gained steam over the years among family owned businesses preparing for succession as an alternative to selling to a competitor or equity firm, said Michael Harden, senior managing director at Ambrose Advisors. The Riverside, Calif.-based adviser and investment banking firm aided several companies in West Michigan in setting up ESOPs, including Kentwood Office Furniture Inc., Axios Inc. and Haviland Enterprises Inc.

“We’re seeing a lot of popularity (for ESOPs) in places like Grand Rapids that want to keep companies local,” Harden said. “The owners want to do right by themselves but they also don’t want to do anything that negatively harms the employees, which you find most middle-market business owners tend to treat their employees like extended family.”

Nearly 5,500 companies, comprising 1.66 million people and $115 billion in assets, participated in ESOP programs nationwide in 2013, according to an analysis of data from the Department of Labor by the National Center for Employee Ownership (NCEO).

Approximately 92 percent of those 5,500 ESOP companies are privately held, with 22 percent of the companies being in the manufacturing sector, according to the NCEO data.

Going forward, Crystal Flash plans to continue its strategy of making strategic acquisitions, a strategy the company put on hold during this transition, Olive said.

“We’re very excited to see what things we can do to help build the company,” Olive said. “We’ve had a great 80-plus-year run here and we’re looking forward to figuring out that future together and trying to grow the company and our team members in their retirement.”

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