Employee stock ownership programs (ESOPs) are not a new concept, but like many proven ideas, they are currently experiencing renewed momentum. We are seeing interest in ESOPs across UMB’s footprint, particularly in larger metropolitan areas, including the Dallas Fort-Worth region. According to 2025 data‡ from the National Center for Employee Ownership, there are about 324 ESOP companies in Texas with 174,715 participants across the state.
What’s driving the increase in ESOPs
What do we attribute the increased interest to? In my experience, it’s a few things. For one, it’s driven by demographics. Aging baby boomers are seeking exit strategies from their businesses. Traditionally, they might have handed down the company to family or sold it to private equity, but now many are drawn to ESOPs as a way to preserve their legacy.
Second, we see ESOPs are often emotionally motivated. Some business owners spend years of sweat equity building something deeply meaningful to them. They may prefer to sell to employees they trust and have worked with over time versus a private equity firm with no tie to the company’s history and future goals.
Third, it’s simply word of mouth. When something works well for a company or in a particular industry, word spreads. In Dallas, ESOPs are particularly popular in construction, engineering, architecture and even government contracting sectors. These are areas where talent retention and long-term community are key.
The right ESOP financing team
Building ESOP financing can seem daunting, but there are many paths that can lead to the destination. It really comes down to the seller’s priorities. Some things that may be important to owners include getting cash up front, long-term flexibility or control over leverage.
Sellers have a few options when it comes to building their ESOP team. An ESOP team can be large and includes the sellers, the bank, the trustee valuation firm, attorneys for the bank, company and trust, as well as financial advising firms assisting with the underwriting and structure. One benefit of working with a traditional bank is that beyond simply lending, some banks, like UMB, offer wealth and private banking services to help business owners manage their liquidity after their ESOP sales close.
Financing mechanics: Ways to make an ESOP work
When it comes to financing mechanics, there are also many paths to consider. Typically, the process begins with a business selling to an ESOP trust. A bank will provide a portion of the financing to the sponsoring company, which in turn makes a loan to the ESOP to finance the acquisition with the seller(s) providing the balance of the financing in the form of Seller Subordinated Notes. It is common for deals to blend bank debt and seller notes. This flexibility often depends on the business’s cash flow and the seller’s goals.
Every ESOP has its own rules when it comes to tenure requirements and vesting schedules. Eligible employees are awarded shares as the ESOP loan is repaid and shares are released according to the established ESOP plan document. These rules vary by company and transaction and should be ironed out with the larger ESOP team when discussing options for the ESOP sale.
Deal mechanics: What makes an ESOP work
The mechanics of financing an ESOP and determining which structure is best are complex, but what makes an ESOP work comes down to one thing: having a team in place that knows which levers to pull for you. A lender with experience in ESOPs will know how to best align your goals with cash, control and flexibility. A good lender will also help you manage interest rates and risk exposure to meet your goals on your anticipated timeline.
2026 outlook
If you’re a business owner looking to start your business exit journey in 2026, ESOPs are a good consideration and conversation to start with your team. Good candidates for ESOP programs include businesses that have been operating for more than five years with strong cash flow and solid management.
Though seeing a bit of a resurgence in recent years, ESOPs have been around a long time and provide a legitimate, strategic tool for business continuity, retention and wealth transition. Especially as tax advantages and private credit continue, successful business owners will continue talking to other business owners about the option, and we believe strong adoption will continue.
To learn more about ESOPs, visit UMB.com or email me directly at jeff.strasner@umb.com.
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