Generation ESOP: 10.8 Million and Growing

By Evan Edwards, Chief Executive Officer, Project Equity

Originally published in Forbes, this article explores ideas and trends shaping the future of employee ownership. We are sharing it here as part of EO Equals’ commitment to elevating conversations that help business owners, advisors, and advocates learn about ownership-driven solutions.

Selling a business to private equity is a common practice, but an often-overlooked or underappreciated option is selling to an Employee Stock Ownership Plan (ESOP).

Earlier this year, a Huntsville, Alabama-based defense contractor transitioned to becoming a 100% ESOP company, and in doing so, its workforce joined the ranks of the over 10.8 million workers who are active participants in an ESOP. That figure accounts for 8% of all workers and currently runs nearly neck and neck with the total number of workers employed by private equity-backed businesses.

Let that last part sink in for a minute.

This is an impressive figure considering the first ESOP, Peninsula Newspapers, was established just 70 years ago. While flying largely under the radar, ESOPs have proven to foster employee wealth and company stability in a relatively short period of time. Some familiar brands, such as Publix, are ESOPs, and recognition of ESOPs’ power is growing.

Yet in large part, the challenge ESOPs face is to keep pace with—if not exceed—private equity in capturing a larger share of the workforce over the next decade.

With the right backing and support, I believe this is achievable. Here’s why it matters.

Keeping the Local Lights On

The true impact of employee ownership extends beyond individual wealth and business performance—it can be a boon to the local economy.

For example, there are many ESOPs in the Huntsville area. Because ESOPs tend to be less likely to relocate or be sold off in pieces, they can help ensure job stability and keep wealth circulating within the local community. Overall, this has been good for Huntsville, as it continues to be ranked among the country’s strongest economies.

When private equity injects capital into an individual business, that capital doesn’t always reach the local community. It may bring financial success to the seller, albeit sometimes at the expense of local jobs and communities.

While the number of employees in ESOPs and private equity-backed companies is relatively close, the difference in outcomes for those workers can be huge—particularly if they start young.

Why Starting Early Can Pay Off

Using data from the Department of Labor, the National Center for Employee Ownership reported that total contributions to ESOP accounts exceeded $107 billion in 2024.

While this is an impressive figure on its own, we now have data to show the impact of starting an ESOP early in one’s career. One study revealed that young people with ESOPs as a benefit at their companies had a median household wealth 92% higher than those who did not: $28,500 compared to $14,831 for those without ESOPs.

This trend also held for single mothers and single parents on average, showing that ESOPs played a crucial role in helping them build wealth for their families. This is hopeful news, considering how many Americans feel behind in their retirement savings.

A Solid Outcome for Workers

There are several reasons a CEO might choose a transition to an ESOP rather than sell the business to an outside buyer, including numerous tax advantages, while also preserving the business’s legacy and maintaining jobs.

A member of my nonprofit’s Founders’ Circle sold his first thriving business two decades ago to a competitor, only to have the parent company shut it down a few years later, leading to the loss of employee jobs in a high-unemployment area. The next time, he vowed to do things differently. When it came time to diversify his current business, he chose instead to sell to his employees through an ESOP. This allowed him to diversify without having to exit the business entirely—and the business will be 100% employee-owned for the long term.

He was initially aware of ESOPs but had a misunderstanding that it meant dealing with individual shareholders, not realizing the company sells to one shareholder: the ESOP trust. After meeting with an advisor and researching for a couple of years, he learned that an ESOP was the perfect solution for him. He sold only a third of the company in 2017, retaining a controlling interest so he could continue to run the business—and keep his employees employed.

Perfect Time for ESOPs

Data from the Exit Planning Institute’s “2025 State of Owner Readiness Generational National Report” examined attitudes and knowledge about different exit strategies by generation. The study found that a little over half of retiring Baby Boomers knew all their options for exiting. This is significant because Baby Boomers hold ownership of the vast majority of small and middle market businesses with payrolls.

According to the recent “Stout ESOP Index,” equity returns from employee stock ownership plans have outperformed both the S&P 500 and Russell 2000. This, coupled with several current realities about private equity—the analysis that they hold too much capital with nowhere to go, the no-longer-sure bet of selling to a competitor and continued fallout from tariffs—means forces are aligning to make now the time for the spotlight to be on ESOPs.

Considerations

As powerful a tool as an ESOP can be, it may not be right for every owner or business. For the selling owner, transitioning to an ESOP may take longer than a direct sale. And businesses with fewer than 35 employees or with EBITDA under $600,000 may find the process financially out of reach. This is why conducting a feasibility study is the critical first step in determining whether an ESOP could be right for your business. Additionally, ESOPs also require annual valuations and other maintenance costs.

Not All or Nothing

For owners interested in employee ownership, the really good news for everyone is that a transition to employee ownership doesn’t have to be an all-or-nothing proposition. Owners can sell a partial stake to an ESOP, which means they can have liquidity while retaining control and continuing to play a role in the company. What’s not to consider?

The bottom line for business: As an M&A strategy, ESOPs can often achieve similar success as a sale to private equity while maintaining greater control over the reason the owner started the business in the first place.

Evan Edwards is the CEO of Project Equity, an EO Equals partner and national nonprofit that helps businesses and communities build wealth through shared ownership.