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Opportunity Knocking

Opportunity Knocking: Impact capital as the transformative agent to take employee ownership to scale

Redesigning the enterprise Aligning finance with people and planet

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As the COVID-19 pandemic sweeps through the global economy, the United States is suffering one of the worst economic crises in its history. As federal relief stalled in Congress during the latter part of 2020, thousands of temporary business closures became permanent, leaving Main Streets bereft of once-vibrant gathering places that produced the revenues crucial to municipal services. The downward spiral is accelerating. 

In this paper, we propose that impact investors and other capital providers could be the agents to give this crisis a silver lining by catalyzing employee ownership buyouts at scale. COVID-19 is accelerating the “silver tsunami” of business sales and closures prompted by baby boomer retirements. According to Project Equity, as many as 1.2 million baby boomer-owned businesses with more than 10 employees could be put up for sale or closed in the next decade, and many of these sooner than expected as a result of the current economic crisis.

Private equity and corporations are positioned to buy up the best of these businesses to benefit the 1 percent, further exacerbating wealth inequality. But there is an alternative: impact capital could become the lever used to redirect wealth into the hands of working Americans, creating a more just and equitable economy that is more resilient against future shocks. Investments in employee ownership buyouts could offer attractive midrange returns, while at the same time ensuring worker-owners are set to achieve long-term financial security.

Building the Investment Ecosystem

Opportunity Knocking makes four key recommendations to build a more robust employee ownership investment ecosystem:

  1. Develop new investment funds for employee ownership
  2. Ensure employee benefit through common metrics and deal guidelines
  3. Use employee-friendly approaches to value engineering
  4. Grow the market by supporting this developing ecosystem with catalytic capital and take it to scale through government policy.

Sample Funds

Innovators are already entering the field. We identified a dozen new and emerging investment funds supporting transitions to employee ownership.

Download the Sample Funds table

Publication date: 2020-12-17
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