Senior housing and health care companies can be uniquely well-suited for employee ownership, creating a thoughtful transition strategy for owners, meaningful retirement benefits for employees, and a foundation for long-term operational success.
An Employee Stock Ownership Plan (“ESOP”) is a structure that transfers ownership of a company from an owner to a trust for the benefit of its employees. ESOPs are most commonly used as an ownership transition vehicle to provide liquidity to business owners using tax-deductible corporate dollars. Employees benefit as shares are allocated to their accounts over time, building retirement value while fostering engagement, accountability, and alignment with organizational performance.
According to the National Center for Employee Ownership (“NCEO”) data as of 2023-2024, there are approximately 6,600 ESOP companies nationwide with over 15 million employees participating in some form of broad-based employee equity ownership.
There are several reasons an ESOP can be an attractive ownership transition strategy for senior housing and health care organizations, including:
1. Preserving Owner Legacy and Continuity of Care
Owners who have built respected senior living communities, skilled nursing facilities, home health agencies, or specialty health care practices often prioritize preserving their mission, reputation, and care philosophy. Selling to a third party, particularly private equity or out-of-market buyers, may not always align with those goals. An ESOP can allow leadership continuity, protect organizational culture, and maintain a long-term commitment to residents, patients, and staff, while still providing meaningful liquidity to the owner.
2. Attracting and Retaining Caregivers and Clinical Talent
Workforce challenges remain one of the most pressing issues in senior housing and health care. Labor shortages, burnout, and wage pressure contribute to turnover that directly impacts quality of care. An ESOP provides employees—from caregivers and nurses to administrative and support teams—a meaningful ownership stake in the organization. This ownership mindset can enhance engagement, strengthen retention, and support recruitment efforts in a competitive labor market.
3. Navigating Regulatory Environments with Continuity
Health care and senior housing transactions often require regulatory approvals, licensing updates, and coordination with payers and state agencies. Because ESOP transactions typically maintain operational continuity and existing management, they can provide a more seamless transition structure compared to an outright third-party sale. Maintaining stability in governance and leadership can be beneficial when navigating change-of-control requirements.
4. Favorable Industry Fundamentals
Demand for senior housing and health care services continues to grow due to demographic trends, aging populations, and increasing health care needs. Strong industry fundamentals can support attractive valuations and transaction opportunities. For owners considering succession planning, this environment creates a compelling window to explore ESOP structures that align long-term mission with financial objectives.
5. Access to Capital and Transaction Flexibility
A robust financial market exists for leveraged ESOP transactions. Lenders are often familiar with the stability of health care cash flows and the historically strong performance of ESOP companies. In addition, for owners who hold real estate, a sale-leaseback transaction can provide additional liquidity to support the ESOP purchase while allowing the operating company to continue serving residents and patients without disruption.
As awareness grows, ESOPs are becoming an increasingly viable succession planning strategy within the senior housing and broader health care sectors. For owners seeking liquidity, tax efficiency, and legacy preservation—while strengthening employee engagement and long-term care quality—an ESOP can offer a compelling win-win solution for owners, employees, and the communities they serve.
Tom DeSimone is a Managing Director at Prairie Capital Advisors, Inc. He can be reached at 630.413.5590 or tdesimone@prairiecap.com.
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