Interview with Laurence Goldberg
Interviewed by Jack Veale, August 2015
Jack Veale: Hi Larry, thank you for allowing ESOP Hall of Fame to learn more about your background in ESOPs. I am so excited to interview you, as you have been such a well-known advisor to our community. Let's start off by walking through your career.
Laurence (Larry) Goldberg: Jack, thank you very much for the honor of sharing my story to your website. My career started in NYC at a large law firm, Shearman and Sterling in the 80's, and with my wife, we moved to San Francisco in 1987. I was introduced by mutual friends to Ron Ludwig of Ludwig and Curtis law firm and joined his firm in 1987. Years after with the death of Jack Curtis and Ron Ludwig's retirement, we merged the firm into with Kirkpatrick and Lockhart in 2001. In 2006, I moved to Sheppard, Mullin for a few years and decided to start a boutique ESOP Law firm with Lynn Dubois in 2013, under the name of ESOP Law Group.
JV: Excellent. So, can you share any "War Stories" or projects that impacted your practice?
LG: In my early years with Ludwig and Curtis, we typically had 2-3 closings a month. Most often, these were minority interest ESOPs unlike today's more frequent 100% ESOP transactions. My first very large project was an OEM company specializing in automotive interiors for cars. In 1990, I was involved a family business transaction was for 30% of the company and the value was above $500 million. I learned a great deal from that transaction, as it was a billion dollar company with a three generation family history. One of my most unique clients was an Idaho trout farm that was the largest in the US. The challenge was convincing 110 diverse shareholders an ESOP was a good deal for them. I had to travel and present to them over a period of time and work with the management team to make the transaction work. I also remember the ESOP at KAPCO as a ground breaking transaction. I believe this was the first ESOP in which Houlihan Lokey acted as an ESOP investment banker instead of an appraiser.
JV: Great stories! So, let's talk about people that helped you along the way besides Ron Ludwig and Jack Curtis that you would like to recognize and thank here.
LG: Obviously, Ron and Jack stand out in my mind. But for others, I would include Ron Gilbert, who worked for Louis Kelso and went out on his own as an ESOP consultant. He and I worked together on over 100 transactions. I learned so much about dealing with employees and the really personal circumstances of business owners selling to the employees. Another person I want to recognize is Elyse Bluth of Duff and Phelps. She is a very creative person working on complex deal structures. Two other people that made an impact on me are Kit Lokey and Jim Zukin of Houlihan Lokey. Jim especially was well known for his "Out of the box" and innovative solutions to complex transactions. Being a part of their discussions and solutions, I learned a great deal for my career.
JV: Your stories with these well-known advisors are great. And finally, any insights of how the ESOP world has changed?
LG: I think the biggest change I have seen is how transactions are now being developed after the tax reform of 2001, which cleared the way for 100% ESOP owned S-Corporations Before 2001, ESOP purchases were typically 30%, a minority amount with less debt and less company risk. After 2001, and the move towards 100% ESOP ownership to get the best tax benefits, ESOP debt and risk increased dramatically. It really upped the ante for ESOP advisors to make sure the deal worked. Some transactions collapsed under the weight of the debt, and the DOL began to scrutinize the deals and challenge the trustees who were approving these transactions. In the past, a 30% transaction often kept the owners in place, and as a result, there was a commitment to keep the business going. With a 100% sale, the owners may be leaving soon after, or will stay for a short period of time while the debt is being paid down. But now, they are creditors, not owners, and may not have the desire to grow the company. They are focused on debt repayment. Fifteen years on, I am glad to say the 100% ESOP-owned S corporation has produced exceptional retirement benefits for many employees.
JV: Great Insights. Which leads me, as a business consultant who is somewhat new to the ESOP World, to share an observation that there are a ton of ESOP advisors who are in their 60's and very few in the 30's and 40's. Are you seeing that observation too?
LG: Absolutely! I wish there were more 30 and 40 year olds competing with me for transactions. I don't see that, and think that could be a down fall for the ESOP World.
JV: Larry, thank you very much for sharing your time and stories for me.
LG: I am honored to be added to your website. Thank you for the opportunity to share my story with others.