When Doug Kovatch began to ponder retirement a few years back, he found himself in a position not uncommon among many of today’s leaders of family businesses.

Kovatch, now 62, had been president at Kovatch Castings Inc., a Uniontown manufacturer started by his father in 1976, for more than 40 years. The second-generation owner was ready to step back, but didn’t have children in the company “to carry on after me.” “I had looked into the possibility of third-party sale, but one of my board of advisers suggested I consider an (Employee Stock Ownership Plan),” he said. “The more I learned about it, the more ESOP became sort of the clearest strategy to meet my goals.”

After just eight months of organization and planning, Kovatch told his 205 employees on Dec. 6 that they are now the owners of KCI — at no cost to them. As part of the ESOP transition, Kovatch sold 100% of his metal casting business to a trust fund, which acquired debt to leverage the purchase. Employees were then gifted shares of the trust.

Continuity, Kovatch said, was one of the biggest advantages of an ESOP over a third-party sale. “It allowed me to keep in place my managers, who share my vision for our future, keep the Kovatch name and hopefully have it continue for many more generations to come,” he said.

There were other benefits. Kovatch can remain connected to the company — he has transitioned to CEO — for as long as he likes and ensure leadership retains some of its core legacy values, such as donating 10% of its pretax earnings to charities tackling poverty and hunger. In addition, establishing an ESOP was an ideal way to reward “our hard-working employees,” he said.

Although Kovatch declined to disclose the financial terms of the transaction, he called the purchase price “very fair.” “Maybe not quite as much as a sell to a third party, but I am very satisfied and was actually a little surprised that we were able to hit the numbers that we did,” he said.

Read the rest of the article at Crain’s Cleveland Business