Case Study: Cimarron Trailers

In 2018, Folience, a 100% ESOP-owned holding company based in Cedar Rapids, Iowa, bought Cimarron Trailers, a manufacturer of high-end custom horse and livestock trailers in Chickasha, Oklahoma. At the time, Folience owned the Cedar Rapids Gazette newspaper and several small-town papers, as well as Color Web Printers, Fusionfarm marketing agency, and Life Line Emergency Vehicles.  As a result of the sale, Cimarron’s 125 employees would become owners through the Folience ESOP. Cimarron’s owners, Michael and Lynn Terry, saw the sale to Folience and its ESOP as an ideal fit. Michael Terry said at the time, “I am very excited when I think about what Folience brings to Cimarron Trailers and our employees." His wife Lynn added, "I see this as a future for the company which will result in continued growth and expansion. And the best part is, our employees get to be owners of Cimarron going forward. It doesn't get any better!" 

According to the press release on the sale, Cimarron Trailers was founded in 2000 by Ronald Jackson and Michael Terry as a division of CM Trailers with the goal of expanding that line of trailers into the aluminum trailer market. In 2004, Michael and Lynn Terry became the sole owners. Cimarron broke away from CM Trailers to become an independent trailer manufacturer.

Current president Ben Janssen shares the Terrys’ excitement  about the sale. In his words,  “The previous owners had several options when they were looking to sell. Private equity and other competitors were interested. They had larger offers than what they ultimately sold to the ESOP for, but they were more concerned about the employees, community, and company than they were about getting the highest offer. They felt that selling to an ESOP was the best scenario.” The sellers were also able to defer taxes on the gains from the sale by reinvesting in stocks and bonds of other companies, a unique tax benefit of selling to an ESOP that can be a part of selling to another company, although not all deals are structured this way. Price was not the driving issue, though. According to Janssen, the Terrys thought the ESOP was the best future for the employees and community. They had seen other companies sell to corporations or private equity firms, and those companies were never the same—they went backwards. The ESOP was a step forward for everyone.

Prior to the sale, Janssen said the culture was very traditional, typical of closely held companies. Very few people were aware of the company’s financial status, and management was largely top-down. That really changed after the buyout, he said. “Our culture is much more open-book, goal-oriented, with budgets and forecasts. Many more influential people are involved in decisions, direction, and action.  We’ve all had to learn a lot, but it allowed growth opportunities for many people in our organization.”

Part of what made the transaction work was that Folience had a very effective integration process, with a dedicated team and laid-out road map. Janssen said that the “process was very well planned out, communicated, and orchestrated.” 

According to Janssen,  “Everyone was very surprised by the sale, but thankful to become employee-owners. It has been a new experience for everyone involved. Our company has grown since becoming an ESOP (other than during the onset of COVID-19 in 2020). We’ve reinvested in our facility, added a second manufacturing plant, and grown our headcount from around 120 to almost 200. Turnover has decreased among the employees that have spent more than three years with the company. Paid time off was revised and improved, health care coverage was great before and has stayed at the same level, and a few new benefits were added, but the best change is the ESOP account. Those numbers are amazing.”

Janssen says he would recommend “anyone with a business to sell, that has a great group of employees, to strongly look at selling to an ESOP. It is a game-changer for the employees and a great legacy to create for the owners.”