We are pleased to share with you our latest report, Investing in Employee Ownership: Financing Conversions Through a Private Equity Fund Model.

As the wealth gap continues to grow, especially along racial lines, stakeholders – movement leaders, workers, and aligned investors – are considering a broader array of options for creating asset-building opportunities for marginalized communities and giving them meaningful voice.

Employee ownership is a way for workers to participate in the value they create, exercise their power and agency, and build material assets that reflect the worker’s contribution vis à vis capital. Decades of studies have confirmed that employee ownership yields measurable benefits for workers, the companies that implement it, and the communities where those companies are located.

The current wave of retirement of business owners provides a special opportunity to implement ownership as part of the succession via a conversion. Conversions provide an exit for the owner that keeps jobs local and creates wealth for workers and are a viable alternative to a private equity or strategic sale.

Given the moment and the appetite, what will lead to more conversions to employee ownership? An obstacle historically has been the lack of availability of aligned capital that meets the needs of owners without placing undue risk on workers.

This report explores the viability of a novel fund model that combines a private equity + ESOP structure, already in existence, to shepherd companies to employee ownership while centering workers, especially people of color and low-wage workers from marginalized communities. As such, it provides both a model for the conversion process at scale with non-extractive finance, and impact recommendations and guardrails to ensure that benefits accrue first and foremost to workers.

We hope this contribution helps activate a drastically higher amount of capital for employee ownership conversions that center workers.

Please send your comments, thoughts, and feedback to info@transformfinance.org. Thank you!