Business owner perspectives on selling to employees: insights from in-depth interviews

Deciding how to sell a closely held business is one of the most consequential decisions business owners face. While most pursue familiar pathways such as private equity acquisition, strategic sale, or family succession, a smaller number sell their companies to employees through forms of employee ownership. This paper examines why some owners choose this less common exit strategy. Drawing on in-depth interviews with 23 business owners who transitioned ownership of their firms to employees – primarily through Employee Stock Ownership Plans (ESOPs) – the study analyzes the financial, strategic, and values-based considerations shaping sellers’ decisions. The findings suggest that owners often approach employee ownership through a two-stage process: an initial trigger such as retirement, partner exit, or liquidity needs prompts exploration of succession options, after which employee ownership emerges as attractive because it addresses those needs while also advancing broader priorities, including preserving jobs, maintaining firm independence, rewarding employees, and protecting business legacy. By centering the perspectives of sellers, the paper highlights owner decision-making as a critical but understudied factor in the diffusion of employee ownership.