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97: Last Call Continued - A Further Discussion on EO After New Belgium

After the sale of New Belgium Brewing was announced, published "Last Call", a collection of views on the impact of New Belgium’s sale on EO. In today’s episode, Bret Keisling discusses posts included in Last Call by Corey Rosen and Michael Keeling, as well as an interview with Christopher Mackin and Richard May.


Episode 97 Transcript

Bitsy McCann: 00:03 Welcome to The EO Podcast where we amplify and celebrate all forms of employee ownership.

Bret Keisling: 00:13 Hello, my friends. My name is Bret Keisling and as it says on my business cards, I'm a passionate advocate for employee ownership. In today's episode, I'm going to continue a discussion that's been going online for the last month or so, inspired by the sale of New Belgium Brewing to an international conglomerate. In December published "Last call: A forum on the end of employee ownership..." and they solicited at that time 14 views, it's now grown to 18 or 19 views, on different takes regarding the sale of New Belgium Brewing. As Fifty by Fifty has added new posts. Karen Kahn, who just is an amazing advocate in her own right, has tagged me and The ESOP Podcast a couple of times on Twitter regarding some articles. So I'm going to take the opportunity to give my thoughts on posts by Corey Rosen, Michael Keeling and an interview with Chris Mackin and Dick May. But first, here's an excerpt from Episode 64 of The ESOP Mini-cast where I frame the discussion on the "Last Call" series.


Bret Keisling: 01:20 There is a great employee ownership advocacy organization called The Democracy Collaborative and they formed an initiative called Fifty by Fifty. We've talked about Fifty by Fifty on previous podcasts. They're dedicated to 50 million employee owners by 2050, and employee owners in the broadest sense of all forms of employee ownership, not just ESOPs. Earlier this week they published "Last Call: A forum on the end of employee ownership at New Belgium" and they brought together 14 voices from employee ownership, some ESOP, some non-ESOP co-ops and collectives and some that have crossed the boundaries a little bit and shared their perspectives about New Belgium sale to an international conglomerate. A lot of the focus was on the sustainability of ESOPs and whether, frankly, short-term employee ownership is even a worthy goal. Karen Kahn of Fifty by Fifty did an amazing job of curating and editing the different articles and in fact a solicited one from me among the other folks. I strongly recommend that you take a look at the different articles and we'll have a link in our show notes. Take a look at all of the different perspectives, whether they're ESOP-centric or not, because one thing that I think we could all do a better job of is working together across the sandbox and we understand on the ESOP side, and I'll have that hat on as I say this, that ESOPs are not designed for permanence at this point in time, but I think it's important that we understand the perspectives and that you as a listener who wants to be informed, take a look and hear what the perspectives are across the sandbox. Because I think what's going to happen before too long is we're going to come together, as we haven't quite before, to benefit all of us. What is good for co-ops, what is good for collectives is good for ESOPs, and I think the same thing goes. So I think it's important that we look at all of the views.

Bret Keisling: 03:15 The one thing that I would like to point out, and again, I'm just very honored that they included me in their offerings of the 14 perspectives. I start each podcast with what is on my business cards, passionate advocate, but I'm included with folks on that list who had been passionate advocates for employee ownerships prior to my even knowing what the field was. So it's gratifying for me to be included in a list of people who have really done so much for employee ownership and have just built the sandbox in ways that I'm just beginning to understand a little bit.

Bret Keisling: 03:49 Okay. That was, as I said, an excerpt from Episode 64 of The ESOP Mini-cast. Now let's go on to current business. As I said at the top, Karen Kahn was kind enough to tag me on three separate posts. Corey Rosen wrote, "ESOP companies face the same pressure and opportunities [as] all companies do." Michael Keeling's topic, "ESOP Terminations -- Red Flag?" And also an interview that was conducted with Christopher Mackin and Richard May called "Encouraging Inclusive Growth." It wouldn't surprise me if the interviewer was Karen, but it's not credited. You'll find these all as well as all of the other posts on the "Last Call" forum at, but let me start with Corey Rosen's article. His headline says it all and I agree completely, "ESOP companies face the same pressure and opportunities all companies do." What Corey Rosen does in his post is what I tried to do in mine. And Jennifer Briggs has a post in the forum as well and she, besides a passionate advocate herself, was a long-time executive level employee of New Belgium.

Bret Keisling: 05:02 And the gist of all of this is, take aside employee ownership for just a moment, business is hard and I'm not being patronizing when I say that. Businesses start and do not last. They last a certain number of years go out of business. There are competitive pressures, all the stuff. I don't want to be simplistic, but business is hard. So I think what Corey, Jennifer, and myself tried to say as well as a few others is: Let's catch our breath and not necessarily be focused on the sky is falling on employee ownership, but rather recognize a natural cycle of business.

Bret Keisling: 05:37 Let's turn next to Michael Keeling's article, "ESOP Terminations - Red Flag?" To start. I think it's reasonable to point out that ESOP terminations are clearly a red flag as New Belgium's termination has generated great interest and the forum and all sorts of conversations. So right off the bat, yes ESOP terminations are a red flag. Michael very clearly -- and by the way, none of these articles are particularly long -- and very succinctly explains the red flag. He summed it up perfectly when he said, "here is the red flag," and I quote, "a common criticism of broad-based employee ownership, particularly the ESOP model, is that ESOPs are “temporary,” designed to reward exiting owners, and that tax incentives and public policy should not be promoting temporary employee ownership," unquote. That is exactly correct. It is a common criticism. Going back to 2008 when I began my very first transaction in ESOP world, I was outside company to three selling shareholders. And at that point the professionals who did a great job -- feasibility study, teeing up the transaction, et cetera, et cetera -- made clear to the selling shareholders that it was not unrealistic to think that they could sell their company in 2009 and in 15 years or so, next generation of the selling family would be able to buy back from the trust and continue the family ownership.

Bret Keisling: 07:09 So in other words, I know firsthand that the temporary nature of ESOPs not only causes policy concerns, but they are in fact for many people, a selling point, some of the transactionists and that sort of thing use the temporary nature to sell it. So there's a built-in tension to some extent on whether ESOP should be permanent. Let me be very clear from my own perspective that I think employee ownership, permanence and longevity are aspirational. We certainly should strive for that. But I also acknowledge with my years as an ESOP trustee that ESOPs are not designed -- permanence is not entered into the equation when a trustee considers a transaction that could lead to a termination. So as is often the case, Michael did a wonderful job of clearly and succinctly identifying the red flag regarding ESOP terminations.

Bret Keisling: 08:11 The next article that I was tagged in is an interview, as I said, on encouraging inclusive growth. It's an interview with Christopher Mackin and Richard May. Chris Mackin also has an additional post as part of "Last Call". I encourage you to read the interview. I encourage you to read previous posts that he has there and there are some links to other stuff that they are doing and encourage you to check it all out. Let me start by saying what they are trying to do. I support 100%; encouraging inclusive growth and loosening access to private equity are very important to the future of employee ownership. Here's an excerpt from their interview that I found very important and I'm quoting, "There is no mistaking our policy priorities here. We wish to promote the most inclusive form of employee ownership possible, but we prefer to pursue that goal through means that are more likely to last, if only because they are judged by parties across ideological divides as fair and equitable. Once employees are dominant shareholders, with voice in corporate governance, we have little doubt that these firms will outperform conventionally structured firms."

Bret Keisling: 09:22 I could not be more on the same page with them. Their support for federal loan guarantees to loosen up equity for employee ownership I think is very important and I hope, and frankly I haven't read the proposed legislation, but I hope that it provides means for access beyond ESOP's into the broader employee ownership community. Because as I've discussed on previous podcasts, equity is a serious problem for ESOPs, but our cousins -- co-ops and collectives, et cetera -- would love to have the problems that ESOPs have. So I hope that any federal legislation finds a true way to normalize between ESOPs and the other forms of employee ownership.

Bret Keisling: 10:06 There's a broader concern that I have about private equity and trying too hard to make ESOP's fit into private equity type transactions. And this isn't meant to be any disrespect to Chris Mackin or Dick May or the approach that they're trying to have. I also want to be very clear that this is not disrespectful at all to private equity firms or M&A advisor firms that are in the ESOP space that I have worked with. I can't speak highly enough about ButcherJoseph [& Co.] for example, the folks at Lazear [Capital Partners], Prairie [Capital Advisors], Stout, I'm going to get in trouble for mentioning or neglecting to mention some firms that do some great seller advisory work. As an ESOP trustee, the most difficult transactions that we had by far were those where the advisors were private equity seller advisors and did not have any concept at all about the realities of ESOP transactions. Ultimately, we can't completely equalize ESOP transactions with private equity transactions because of the nature of the transactions and what I mean by that is as a trustee, I could only pay fair market value when I was doing a transaction on behalf of the participants. Oftentimes my partner Cap Trustees and I would distinguish as part of our process how it would differ if we were buying a company with our own funds versus the funds that we use as trustees. Meaning in every single case where we had a transaction, we knew that if we were investing our own money, it was certainly a good investment or we wouldn't have done it as trustees, but we were also aware that we could pay significantly more money if it were our own money. It's a little bit of a shorthand, but for example, generally you can't pay extra for good will in an ESOP transaction that you could in any other transaction. Strategic acquisitions are more challenging for ESOPs than non-ESOP companies because you can decide you want to acquire someone strategically and you can put as much money out there as you'd like if you privately own the company.

Bret Keisling: 12:31 In my seven years as an ESOP trustee, there were a number of transactions, and frankly it wasn't unusual, where the selling shareholder had looked at other opportunities to sell the company and ultimately decided on employee ownership. Certainly, and I'm very proud to say, some of the folks just drank the Kool-Aid, as we say, became believers in employee ownership, thought that selling to an ESOP and creating ownership fit perfectly with their values, that sort of thing. Ironically, New Belgium Brewery fits into that description. There are also people who sold to ESOPs, quite candidly, because they couldn't sell the company anywhere else and we, in that sense, employee ownership. ESOPs were kind of a last resort.

Bret Keisling: 13:12 Where ESOPs are the last resort, it's important to remember how the selling shareholder got there. Often they tried to market, the company in other places and simply couldn't do so. What private equity seeks to do, and I realize I'm speaking generally, is to maximize return for the selling shareholder and a lot of times that's simply incompatible with the realities of ESOP transactions. So for me, very broadly, the concern that I have when we say in broad strokes, let's make ESOP transactions either more similar to a private equity transactions or more palatable to private equity experts, is it doesn't take into account the realities of ESOPs from the trustee perspective, the fair market value in ESOP language perspective. So I'm very supportive of Chris Mackin and Dick May and what they're trying to do with inclusive growth. I think it's very important. I certainly support freeing up capital and equity for all forms of employee ownership, but I think at a certain point we are going to have to find some common ground with the private equity folks and address what I'll summarize as managing the expectations of private equity professionals and the selling shareholders.

Bret Keisling: 14:37 With that, I want to give my thanks to and Karen Kahn for first of all bringing us the series "Last Call." I do hope again that you'll check it out. I also want to thank Karen for tagging me on some of the tweets with these articles that inspired today's episode of the podcast. And I want to stress, as I've always said, if you've heard me talking about you on the podcast, I'd much rather you come out and talk about yourself. Corey Rosen would be welcome anytime, Michael Keeling has been on in the past and would love to have him back. And for Chris Mackin and Dick May, you're both doing a lot of really good work and I'd love one or both of you to come on the podcast and let me know how I or our podcast audience can help support you in what you're doing.

Bret Keisling: 15:21 Now to you, our listener. Thank you so much for joining us. I hope you'll come back Friday for The ESOP Mini-cast. I appreciate your listening. It means a lot. This is Bret Keisling. Have a great day.

Bitsy McCann: 15:35 We'd love to hear from you! To contact us, find us on Facebook at KEISOP, LLC and on Twitter @ESOPPodcast. To reach Bret, with one "T", email, on LinkedIn at Bret Keisling, and most actively on Twitter at @EO_Bret. Again, that's one "T". This podcast has been produced by The KEISOP Group, technical assistance provided by Third Circle, Inc. and BitsyPlus Design. Original music composed by Max Keisling, archival podcast material edited and produced by Brian Keisling, and I'm Bitsy McCann.

Standard Disclaimer: The views expressed herein are my own and don't represent those of my own firms or the organizations to which I belong. Nothing in the podcast should be construed as guidance or advice of any kind in any field and the fact that I mentioned an organizational website or an advocate or a company on a podcast does not reflect an endorsement, but if you've heard your name or your group's name mentioned on this podcast, I'd love to have you come on and talk about it yourself.


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