An ESOP feasibility analysis is a detailed first step in the process of establishing an ESOP in a qualifying employer corporation. Such a study is beneficial to both shareholders who are considering selling shares to an ESOP and employer corporation managers.
This information enables these parties of interest to determine whether an ESOP employer stock purchase transaction is an effective strategy for achieving their various goals. ESOP feasibility studies can vary greatly depending on the situation.
However, most ESOP feasibility studies include basic elements that must be addressed in order to (1) provide meaningful information to all parties and (2) avoid costly mistakes that could damage the ESOP's long-term success.