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A Bold Path to an Inclusive, Thriving Economy: Employee Ownership

Cameron Stevens’ wife drew a line in the sand.

She was tired of “the other woman,” she said a laugh, referring to the company he’d founded in college. It was time for him to retire and see more of his family, including three grandchildren under the age of three.

So, Stevens, 62, began to look into selling the El Paso, Texas, landscaping business he’d built into an enterprise employing as many as 200 people with annual revenues of $15 million.

Problem was, many of the workers at Accent Landscape Contractors, Inc had become like family themselves over the 43 years that he’d owned his business.

Protecting them by shifting to an Employee Stock Ownership Plan (ESOP) was his first impulse—until he investigated it. “It’s expensive, complicated and I would have to finance it, which would keep me involved and not retired,” he said.

Reluctantly, he began interviewing merger and acquisitions companies. Nothing felt right. “I knew my people might be fired, there might be new rules, the dynamic might change. I didn’t want that, but it’s all I was finding. I was pretty discouraged.”

Stevens is part of the so-called “silver tsunami”—baby boomers who have spent their working lives building small businesses across the country, are now ready to pass them on responsibly, but often don’t know how. Census Bureau data indicates that 51 percent of business owners in in the U.S. were age 55 or older in 2018.

Accent Landscape Contractors, now employee-owned in El Paso, Texas. (Photo Courtesy of Accent Landscape Contractors Inc.)

Enter Apis & Heritage Capital Partners, a social impact private equity firm founded on Juneteenth of 2021 that works with businesses with significant workforces of color so that founders can receive a fair return on their life’s work while their companies become 100% employee-owned under A&H’s stewardship. Stevens’ business fit A&H’s criteria, in part because some 98 percent of the workers are Hispanic.

Retiring business owner Cameron Stevens listens to A&H team members explain employee ownership to his workers. (Photo Courtesy of A&H)

“As soon as I hung up the phone with them, I knew I wanted to make this work,” Stevens said. “A lot of our people start out at minimum wage, and things come up. We used to joke that we should call ourselves the Accent Landscaping and Loan company. But I always wanted to help those who want to help themselves. Now, employee ownership is part of it.”

The Rockefeller Foundation’s Zero Gap Fund provided initial seed money of $3 million for the A&H Legacy Fund I, and was joined by other investors including the Ford, Kellogg and Skoll Foundations, Gary Community Investments, Ascension Investment Management and impact-oriented individual investors.

“Helping vital small businesses with a significant percentage of Black and Brown workers transition to employee-ownership is an effective and exciting way to address the racial wealth gap—and closing that gap boosts our economy across the board,” said Maria Kozloski, Senior Vice President of Innovative Finance at The Rockefeller Foundation. “Research shows employee-owned companies tend to be more productive and profitable, while workers retire with significantly more savings. A&H is engaged in exactly the kind of visionary work we want to support.”

Former College Classmates Join Forces to Start A&H

A&H was founded by Todd Leverette and Phil Reeves, former college classmates and both Phi Beta Kappa graduates from Morehouse College in Atlanta, Georgia.

Leverette notes both Morehouse and his parents, who fought for civil rights in the South, groomed him early to move the needle in favor of social and economic equity.

  • Everyone made sure that the question in my head was, what are you doing for your community?
    Todd Leverette
    Co-Principal of Apis & Heritage Capital Partners and Program Manager of Legacy Business Initiatives at the Democracy At Work Institute

He first heard of worker ownership in 2016 while a program manager with the Democracy at Work Institute’s Legacy Business Initiative, after previous employment on Wall Street and in residential real estate. He reached out to Reeves, who had worked in finance, with small businesses, and in government.

“Phil and I see the world similarly and are trying to get to the same place, but we approach it differently and that’s often useful,” Leverette notes. “We asked ourselves: if employee-owned businesses do so well for so many, how come there aren’t more of them? And we realized that it was a shortage of capital to help make these transitions happen, and so we came up with the idea of creating an employee-ownership transition fund at the end of 2018, and began building out the concept in 2019.”

How A&H Creates Employee Stock Ownership Plans:

  1. The A&H team identifies a healthy company with a workforce that is at least one-third people of color and 50 percent low-income, and negotiates a sale price with an owner seeking to retire.
  2. Their fund buys shares in the name of an employee trust, so that from Day One, the employees own the business.
  3. Once it is a trust, the business pays no federal taxes and, in 44 states, no state taxes.
  4. A&H negotiates with a bank as the senior lender, who carries 30 to 40 percent of the loan.
  5. A&H stays with the company for five years to help make a successful transition. In that time, the company pays off the institutional lender (in about three or four years) and that lender then buys out A&H’s share.
  6. After an anticipated eight years, all lenders are paid off and the company is fully in employee hands.
  7. Employees gain shares annually based on their salary; the shares are released over 20 years to make space for new hires.
  8. To be vested, an employee must stay with the company for four years, and then can cash in the shares when they are leaving the company.

Initially, they intended to arrange financing for a single acquisition to prove the model could work. But Michael Brownrigg, who joined them next and had co-founded one of the nation’s first impact investment banks, encouraged them to think bigger. They decided to create a fund to help numerous companies transition.

In September, A&H announced they had raised a total of nearly $60 million and were closing the fund to new investors. This was appreciably higher than they had hoped for and marks, as Reeves says, the power of the A&H model to both do good and do well.

The A&H Team (left to right) Michael Brownrigg, Natalie Edwards, Todd Leverette, Philip Reeves, Jason Ollison and Kyle Chin-How. (Photo Courtesy of A&H)

Changing the Arc of a Family’s Future

“We sometimes say there are any number of ways to manage wealth, but really only two ways to build it in this country: own your home or own your company,” Brownrigg said. “It’s very hard to start at zero and get ahead. By creating long-term savings and wealth through employee ownership, we change the arc of a family’s potential for generations.”

Focused on closing the racial wealth gap, A&H looks for companies where at least one-third of the employees are Black or Brown, although all workers benefit from the model.

Workers of color as a group are particularly hard hit in retirement. About 47 percent of all adults aged 55-66 have no retirement savings, according to the U.S. Census Bureau. Dig deeper, and an even more troubling picture emerges: while 57 percent of White families held retirement assets, only 35 percent of Black families and 26 percent of Latinx families have retirement account savings, according to the Federal Reserve System’s Survey of Consumer Finances.

And even Black and Latinx households that do have savings have less to put away towards their retirement. The median retirement savings for a White household between ages 25 and 61 is $79,500. For Asian-Americans, it is $67,025. Black and Latinx households have $29,200 and $23,000, respectively.

“Employee ownership is an incredibly powerful tool for employee retention,” Brownrigg notes, “because every year, employees see their accounts growing twenty times more than the average 401(k). And this is without any financial contribution on their part; they earn the shares by staying with the company and helping it to thrive.”

This work, considered globally, also supports the U.N. Sustainable Development Goals 8 and 10, referring to decent work and economic growth, and reduced inequalities.

A&H Hopes for Copycats

A&H, in fact, is at the cutting edge of a movement whose time has come, said the A&H team.

Baby Boomers account for approximately 40 percent of small business or franchise ownership and small businesses employ about 48 percent of the workforce. Many of these are service-based businesses such as restaurants, auto shops, plumbing businesses, hardware repair companies, and more. And in many cases, their children, with other career paths possible today, are not interested in taking over the businesses.

A&H’s Todd Leverette shakes hands with business owner Cameron Stevens at a meeting to explain employee ownership in El Paso, with A&H team members and landscaping employees in attendance. (Photo Courtesy of A&H)

“What will happen with these companies?” Reeves asks. “We want to see the employees become the owners. We exist to make that process a lot simpler. But we hope for the existence of more funds to do this work. We want to build this sector. Our aspiration is to engender copycats.”

At Accent Landscape Contractors, Inc., Stevens agreed to stay on for one year and support the transition, and that stability has increased employee confidence.

The two employees he told first about his retirement were Joe L. Aguilar, Jr., the new CEO, and Elida V. Franco, the new CFO – and some tears were shed. Aguilar has been working for Accent for 32 years, after Stevens lured him away from a sprinkler supplier. Franco started doing books for Stevens 35 years ago, when she was a 22-year-old in college.

“I met one of my co-workers, Veronica, when she was a little girl carried on the shoulders of her father, who also worked for Cameron,” Franco says. “Now she’s been working with us for almost 15 years. We’ve seen our children grow, and our grandchildren appear. We are family. It’s hard to let go. But I know Cameron would never let us go somewhere where we wouldn’t be successful.”

Aguilar agrees with that assessment. “I always felt good about Cameron, from the first day he hired me,” he says. “So even if I don’t fully understand this, I trust it. I also do know our employees pretty much live on their salaries, without much saving for retirement. I think employee ownership has promise to have a big positive impact on peoples’ lives.”

And that, Leverette says, is the point. “I’m doing what my mom and my dad and Morehouse told me to do,” he says, “Now we want to activate other finance professionals to pick up this mantle. There should be 20 firms—even more—out there doing this work.”

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