Phacil, Inc. (Phacil) completed an employee stock ownership plan (ESOP) buyout led by management. Phacil explored a range of transaction alternatives and selected an ESOP as the optimal transaction structure and cultural fit for the company. The McLean Group's Aerospace, Defense & Government Services (ADG) practice served as the exclusive transaction advisor to Phacil.
Phacil provides mission-focused, results-driven technology solutions to the Federal Government in the areas of Software Services, Systems Engineering, Integration & Operations, Cybersecurity, and Service Desk operations. Phacil’s team of more than 800 technical professionals effectively serve customers throughout the U.S. and overseas.
“It is a very exciting time for Phacil and our employees as we begin our 16th year of existence as a firm. We are proud of the past and well-positioned to move forward as a company given the continuity of operations an ESOP provides,” stated Mark Cabrey, Phacil President and Chief Operating Officer. “Becoming an employee-owned company will not change Phacil’s day-to-day operations or management. The executive and senior management team will continue to run the Company. With the ESOP, Phacil remains the same. The primary difference is that the Company stock is now held by a trust on behalf of Phacil employees,” stated Mehdi Cherqaoui, Phacil Executive Vice President and Chief Financial Officer.
He added, “The McLean Group was an invaluable partner in helping us structure, negotiate and execute this transaction. We benefited greatly from their unique combination of ESOP knowledge, government contracting industry insight and client-service mindset to close this transaction.”
Alternative transaction structures, such as ESOPs, are becoming increasingly prevalent in the ADG market. An ESOP is a benefit plan designed to provide employees with an ownership stake in the Company. It is a long-term plan that rewards employees for remaining with the Company and growing it over time. “Nearly 9,000 successful companies across the United States are substantially or entirely owned by their employees,” said Tom Shoemaker, Phacil Executive Chairman and Chief Executive Officer. “The ESOP success formula is simple: Employee-owners make great employees. Employee-owners know that their efforts can help them gain a benefit that is greater than just their salary.”
ESOPs offer several potential strategic benefits to government services businesses. Specifically, they:
- Provide partial or full liquidity to shareholders while preserving a company’s legacy and independence;
- Are a strong employee retention and powerful recruitment tool;
- Are a viable transaction alternative for businesses that hold set-aside contracts;
- Enable owners to simultaneously explore alternative transactions;
- May significantly reduce or even eliminate taxes for both the selling shareholders and the company;
- Provide possible economic benefits from incorporating ESOP expenses in rate structure.
About The McLean Group
The McLean Group is a leading investment bank that provides objective strategic and financial advice on mergers and acquisitions, debt and equity recapitalizations, ESOPs and business valuations. The firm’s ADG team is one of the largest dedicated groups in the country and has deep transactional expertise in nearly every segment of the government market. Continuing its track record as a leading advisor to middle market companies in the ADG industry, The McLean Group and its principals have closed 67 transactions since 2010 including 13 in the past 13 months. The firm’s transaction advisory and valuation services reflect comprehensive industry knowledge, extensive transactional successes, commitment to providing senior-level attention to every client engagement, and real-time understanding of industry-specific valuation drivers. This represents The McLean Group’s 3rd ADG ESOP transaction in the past 2 years.
