Brian Andreosky, President of Aldrich Capital Advisors, and Matthew Drake and Scott Duncan, Co–founders and Partners at BaseRock Partners, an investment bank serving the engineering and construction industry, discuss the ascendance of employee stock ownership plans (ESOPs) in the construction industry—and how construction firm owners can determine whether ESOPs are right for their company.
Brian Andreosky (BA): One of the questions we often get from our clients is “What are my options for transferring ownership at some point?” For owners of construction companies, everything from a sale of the company to liquidation are options, but conversations about employee stock ownership plans (ESOPs) have really accelerated in the last year. In fact, in Aldrich’s 2025 West Coast Private Company Report, we found that 45% of company owners are considering ESOPs as a transition strategy. What kind of impact are you seeing ESOPs have overall—and more specifically, what are you seeing in the construction industry right now?
Matthew Drake (MD): ESOPs have been a growing trend in the construction industry over the past decade. For example, construction companies represent approximately 17% of all ESOPs; however, they represent over 30% of all new ESOPs being formed. We’ve seen firsthand that while a lot of contractors run strong businesses, there just isn’t a deep third-party M&A market for many of them. Some companies could sell but ultimately choose an ESOP instead. However, the majority of construction firms going the ESOP route are the ones that are tougher to sell—like general contractors and heavy civil contractors.
ESOPs can be a great alternative for these business owners, and in many cases, they actually prefer them to selling to a third party. Most construction firms are family-owned. Their cultures are built around their people. In today’s tight labor market, attracting and retaining talent is a top priority, and ESOPs are proving to be a powerful tool in that effort. That’s why we’re seeing a significant shift toward ESOPs in this space, and I don’t see that momentum slowing down anytime soon.
BA: What advice would you give a business owner for determining if they’re a good candidate for an ESOP? Having a good management team is crucial, but what is some other key criteria for making this transition successful?
MD: First and foremost, make sure you’re educated on what you’re getting into. Understand your options: are you saleable to a third party? Does a management buyout make sense? How does an ESOP compare? The best ESOPs are the ones doing it for the right reasons: to preserve their culture and legacy, and to retain and recruit talent into their organization. They have a sustainable business operation and a solid management succession plan, which is critical since sellers won’t receive all their proceeds upfront. Just as important, they have a culture where employees respect and trust leadership, so when the decision is made, the team is on board.
Scott Duncan (SD): Having early conversations with your trusted advisors is critically important. This can include accountants, attorneys, investment bankers—the people you trust to give you good advice on what’s happening, what your plan is, and how you’re going to achieve it.
From a technical standpoint, ESOPs come with specific rules and regulations that companies must meet. Generally, a business should have at least 25 employees and around $1 million in earnings before interest, taxes, depreciation, and amortization (EBITDA) to make an ESOP viable. That said, there’s no strict cutoff. Smaller companies can still pursue an ESOP, but given the costs of implementation, owners typically need a certain level of scale to make it worthwhile.
BA: What recommendations do you have for owners who are thinking about starting the planning process for an ESOP?
MD: My biggest piece of advice is to plan early. In our industry, you simply can’t begin too soon. We often get calls from owners in their 70s and 80s, and while that’s workable, starting earlier provides more options. Even for companies that are saleable to a third party, an earn-out period and/or equity rollover are often part of the deal, adding to the timeline. These processes take time, and ESOPs or internal buyouts take even longer. That’s why early planning isn’t just beneficial, it’s critical in our industry.
SD: All too often, we see business owners try to navigate this alone because of the confidentiality involved. It’s a bit like doing your own taxes: you can do it, but it usually ends up not being the most beneficial route. Building a strong team of advisors is an important first step since they have experience and can help you understand your options as a company. They can also help you understand how any strategy you’re considering will fit into the reality of the market, then they can help you move forward with a plan that will help achieve your goals.
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About Brian Andreosky
Brian Andreosky is President of Aldrich Capital Advisors, and is dedicated to helping business owners transition their companies. In this role, he provides exit planning services to help business owners find the right solution to transition and maximize the value of their business. Brian is a member of the Exit Planning Institute (EPI). Prior to joining Aldrich, he held roles in investment management, management consulting, and private equity.
About Matthew Drake
Matthew Drake is co-founder and partner at BaseRock Partners. He has nearly two decades of corporate finance advisory experience, as well as experience in advising middle-market companies in mergers & acquisitions and other internal ownership transitions. Matthew is an industry leader in the structuring and execution of ESOP buyouts.
About Scott Duncan
Scott Duncan is co-founder and partner at BaseRock Partners. He brings more than 20 years of financial advisory experience to the firm, including 15 focused exclusively on construction and construction materials M&A transactions. Scott’s transaction experience spans all types of construction industry clients, including general building contractors, heavy civil contractors, and a wide variety of specialty contractors.
About Aldrich Capital Advisors LP
Aldrich Capital Advisors LP provides advisory services for business transactions, including succession planning, acquisitions, or mergers. We help business owners navigate challenges and unlock growth opportunities with actionable insights. Our innovative team is dedicated to your success.
