Southeast Acquisition Capital

"It is not a perk, it’s a part." This line from Grace Zuncic at last week's Ownership Works' 2024 Shared Ownership CEO & Executive Convening perfectly captured the spirit of the event. Broad-based employee ownership is gaining serious momentum as a core business strategy—one that recognizes the commitment and dedication of every team member who contributes to success. The advantages are compelling: from increased productivity and engagement to better retention and enhanced brand value, these ownership models don’t just benefit employees; they drive meaningful results across the business. This is a transformative shift in how we’ll operate in the coming years, embedding ownership as an essential part of the business rather than an add-on. Proud to support the movement—next meeting, I’ll be wearing my OW pin as a reminder of where we’re headed! #SharedOwnership #EmployeeOwnership #OwnershipWorks #WealthBuilding

"It is not a perk, it’s a part." This line from Grace Zuncic at last week's Ownership Works' 2024 Shared Ownership CEO & Executive Convening perfectly captured the spirit of the event. Broad-based employee ownership is gaining serious momentum as a core business strategy—one that recognizes the commitment and dedication of every team member who contributes to success. The advantages are compelling: from increased productivity and engagement to better retention and enhanced brand value, these ownership models don’t just benefit employees; they drive meaningful results across the business. This is a transformative shift in how we’ll operate in the coming years, embedding ownership as an essential part of the business rather than an add-on. Proud to support the movement—next meeting, I’ll be wearing my OW pin as a reminder of where we’re headed! #SharedOwnership #EmployeeOwnership #OwnershipWorks #WealthBuilding

For anyone interested in employee ownership and the possibility of it becoming more widely adopted, I encourage you to read this essay by Ryan Thornton from Vermont Employee Ownership Center. https://lnkd.in/geVFSdRE

How does $5k + $5k = $1.65M? We founded Southeast Acquisition Capital to acquire and grow great small businesses and create wealth for the employees who help make this happen. A key component of employee ownership is that employee equity grants are 1) not paid for and 2) completely incremental to existing compensation and benefits. Employee owners in businesses that we acquire will earn the same compensation and receive the same healthcare and 401k benefits -- and ideally eventually much more. Below is simplified depiction of how employee ownership can create a generation of "millionaires next door". Very simply, this chart shows the retirement account value of a 25-year-old employee who contributes $5k / year to his or her 401k and also receives $5k / year in company stock via an ESOP. The analysis assumes each account grows at 6% per year, which is roughly the long-term return of the US equity market. In reality, the equity value of successful ESOPs can compound at much higher levels through a combination of above-average earnings growth and the benefits of de-leverage. By the time they reach retirement age, our hypothetical employee has accrued over $800k in BOTH their 401k and their ESOP, for a total retirement account balance in excess of $1.6M. If this $1.6M were annuitized at 4%, they would enjoy retirement income of $64k ($1.6M x 4%) plus likely another $20k in Social Security benefits. (And don't let anyone convince you otherwise, Social Security is a REAL paid-in benefit for everyone, even for Millennials and Gen Z!) Employee ownership works mechanically, because it incentivizes the behaviors that have lead to wealth creation for generations: 1) long-term orientation, 2) compounding, 3) smart use of leverage, and 4) tax-deferred equity growth. Employe ownership works in practice, because the day-to-day lived experience of employee owners benefits from an increase in autonomy, purpose, mastery, and community. It's not that complicated!

We at Southeast Acquisition Capital agree with Peter Stavros that employee ownership is the future of capitalism and our economy, and we are bringing the KKR model to Main Street. Southeast offers owners of small businesses an easy option to sell their company in a way that benefits their employees and their communities. We believe that transparency, alignment of incentives, and giving everyone a voice can unlock individual talent and empower all workers to make an impact. Ultimately, this will lead to better outcomes for the businesses and communities in which we invest. In this TED talk, Pete references his masters thesis, which I stumbled upon in 2017 while exploring employee ownership models during my MBA at IE Business School. Long before employee ownership was part of the investing zeitgeist, his paper showed me that it was possible to combine alternative forms of ownership with scalable forms of capital formation, like private equity, and it was instrumental in putting me on this path. Thankfully Pete, his nonprofit Ownership Works, and KKR are on their game in getting the word out about the power of employee ownership, because in my years working in employee ownership, I still haven't come across anyone else who has read it! https://lnkd.in/ejVbfiqe