Bill looks to make it easier for small businesses to transition to employee ownership
Photo | Courtesy of Commonwealth of Massachusetts
Massachusetts State House
Warning that a "silver tsunami" of Baby Boomer businessowners looking to sell in the next 15 to 20 years could lead to vanishing local small businesses, advocates asked lawmakers Thursday to provide incentives for employee ownership structures.
John Abrams, who said his business was employee-owned for 40 years and has written two books on employee ownership, said about three million American small businesses including about 70,000 in Massachusetts have founders older than 55 and are likely to transition ownership in the next two decades.
"Some of those companies will be passed down in families, but less than in the past. Many will unceremoniously close their doors finding no buyer, leaving holes on Main Street. Others will be targeted by strategic buyers and private equity. They may be absorbed, bundled, relocated, carved up, sold for parts, their mission and culture undone. Jobs will be lost," he said as part of a panel organized by the Coalition for Worker Ownership and Power. "While many founders wish to preserve the businesses they devoted much of their life to, they and their advisors, financial planners, succession consultants, business brokers, accountants, know little of the employee ownership options available that can accomplish that."
Coalition members pitched the Joint Committee on Economic Development on a bill (H 503 / S 305) they said would make it easier for employees to buy the businesses they work for during ownership transitions, including by giving employees a right of first refusal, making technical assistance available and incentivizing the selling owner by exempting sales of less than $1 million (or the first $1 million in sales of a greater value) from the state capital gains tax, according to a committee summary.
Halsey Platt, the owner of a residential construction business based in Ayer, told the committee that he is in the process of converting his business into an employee cooperative. He said he has been building the business for 33 years. As he begins to think about exiting the business, he said "the notion of being able to have my employees be able to build generational wealth was incredibly appealing to me."
"I think by the Legislature enacting these laws, it will make my choice and that business transition more normalized. And I think if the Legislature moves forward with this, part of what happens here in Massachusetts will be that it changes the landscape, that then employees get educated about what an employee cooperative is and they are able to start to think about that," Platt said. "This bill is not restrictive in terms of the owner of the business who wants to sell. It is simply giving those employees the opportunity to match that offer."
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