D. Wilson is a McAllen, Texas, based construction company and one of the 100 largest Texas construction firms.
When our founder Darrell Wilson passed away in 1992, his two sons, Mike and Bill, took over the company. They knew the Wilson family ownership would end with them and they would have to get a succession plan in place, especially since Mike was hoping to retire in the early 2000s.
Sometime in 1999, we began to hear more and more about ESOPs, particularly S corporation ESOPs. The tax benefits, the preservation of jobs, achieving liquidity—it all sounded too good to be true. But the more the leadership team learned, the more we realized we could pull this off, especially after one seminar with a particularly enthused speaker.
In 2001, with Mike eager to retire, a much larger company came in and put an offer on the table. As a matter of due diligence we considered it, so the choice became acquisition vs. ESOP. The terms of the offer meant the brothers would get paid either way, with both the outsider and the ESOP offering comparable amounts. But they also stipulated that they would only guarantee a job for Bill, which was a complete nonstarter. When we discussed the offer, Bill said, “There are people who have been here longer than me—I can’t and won’t put them out on the street.”
So in October of 2001, the brothers financed the deal without warrants and sold the company 100% to an ESOP, through 20-year notes. Then, as luck would have it, the market boomed and we were able to pay off the notes in six years!