Stevens & Lee and Griffin Advise Godshall’s Quality Meats, Inc. in the Creation of Employee Owners Through a Sale of Shares to an ESOP

Company Overview
Godshall’s Quality Meats, Inc. (“Godshall’s”), headquartered in Telford, PA, has been manufacturing high end meat and poultry products since 1945 including natural/organic products. Now in its third generation of leadership, Godshall’s remains dedicated to supplying premium meat specialty items to their loyal customers. Godshall’s state-of-the-art facilities, a model of cleanliness and quality, still reside on the farm site of the Godshall family. Its renowned Turkey Bacon, Beef Bacon and meat snack line can be found on store shelves throughout the United States.

Situation
As a third generation family owned business, the owners were seeking a mechanism to:

• Tax-efficiently unlock liquidity in a highly successful business;
• Maintain ownership and control; and
• Reward employees for helping to build Godshall’s into what it is today

Solution
Griffin was engaged by Godshall’s to determine whether selling a minority ownership stake to a newly established employee stock ownership plan (ESOP) would accomplish the goals the owners set out to achieve. Griffin’s feasibility analysis showed that notonly could the owners achieve an extremely tax-efficient liquidity event, but that the tax savings from the annual ESOP contribution and the cash flow savings from funds that were previously going to pay taxes went a long way toward paying off the debt utilized for the liquidity event. After reviewing the feasibility analysis, the company ultimately decided that an ESOP would be the right fit and engaged Stevens & Lee and Griffin to implement the ESOP.

As part of the engagement, Griffin:

• Raised the debt financings with:
  • a higher borrowing base
  • a lower interest rate
  • removal of mortgages on related party debt
  • no personal guarantees
  • elimination of prepayment penalties
  • better overall terms and conditions
• Helped to create the transaction structure that allowed for a tax-free liquidity event; and
• Negotiated with the ESOP Trustee on the sale of a minority ownership stake in the company to the ESOP

Having successfully completed a minority sale to the ESOP, a new generation of owners, the employees themselves, will share in the future growth of Godshall’s. Mark Godshall, President and CEO of Godshall’s said, “We are really happy for our employees that they are going to be able to share in the success of this great company that they have worked so hard to help build.” Mark also said, “When we first started talking about ESOPs, we knew we wanted to get the best. We couldn’t be happier with the job that Stevens & Lee and Griffin did for us.”

For more information on this transaction, contact Mark B. Russell, Senior Managing Director, at 610.478.2166 or Thomas A. Hill, Vice President, at 610.478.2034.