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Ohio Employee Ownership Center helps business owners consider workers when it's time to sell

In this article from Crain's Cleveland Business, Sandra Reid, vice president of corporate communications and strategic plan administration, talks about why Davey went down the employee-ownership path. 

Posted: Nov. 30, 2015 

By Judy Stringer

When Select Machine founders Doug Beavers and Bill Sagaser were ready to step away, they didn’t leave the Kent-based machine shop to court potential buyers or – for that matter –  they didn’t even pick up a phone.

They went right to the workers on the floor.

“When you sell a company such as ours, some bigger company will come and buy you up, but they do not really want anything to do with the company,” said Todd Brewster, one of those workers on the floor. “They just want a customer list.  Eventually they will just shut it down. The previous owners did not want that to happen.”

With guidance from the Ohio Employee Ownership Center, based at Kent State University, Select Machine employees began to buy out the partners in 2005 with an initial purchase of 40%. The economic downturn slowed the planned transition timeline a bit, but eventually – by 2011, to be specific – Select Machine was a 100% worker-owned cooperative, according to Brewster, who is now the company’s president.

Employee ownership is hardly a new concept. But with the economy recovering and entrepreneurial boomers aging, OEOC director Roy Messing expects to see a growing number of companies transition into the hands of their employees, either via a worker-owned cooperative like Select Machine or the more widely used Employee Stock Ownership Plans (ESOP).

Messing bases his predication on the fact that aging business owners will face stiff competition on an open market packed with other companies up for sale. Employee purchase can offer some would-be sellers an attractive alternative.

“These businesses are getting grayer, and they are going to have to do something,” Messing said.

Industrial roots

Kent State political science professor John Logue founded the OEOC in 1987. At the time, Logue wanted to help retain local jobs – namely those at risk in the struggling steel and manufacturing industries – by transitioning ownership to employees via ESOPs.

Over the years, the nonprofit has expanded its focus. In the 1990s, it developed educational materials and outreach activities related succession planning through grants from the George Gund Foundation and the Cleveland Foundation. 

“We started to see that some [business] owners were ready to transition,” Messing said, “but financially, structurally – however you want to look at it – the company itself was not.”

In the mid-2000s, the center added more resources on the cooperative side and helped launch the Evergreen Cooperatives in Cleveland. That was about the time Logue began talking with Select Machine.

Brewster said the OEOC met with owners and employees separately to gather information and gauge interest. It also funded an outside appraisal of the company’s worth. Once the project appeared feasible on paper, Logue and Toledo attorney Mark Stewart, an expert in worker cooperatives who worked closely with the OEOC, sat down with the stakeholders and began drafting transition plans, bylaws and buy-sell agreements.

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