The Moon Township-based engineering consulting firm became employee-owned in November.
MOON TOWNSHIP, PA — Like many business owners hoping to retire in the next five years, Amy Veltri and John Nottingham were uncertain about how they would untangle themselves from their successful business they started together 21 years ago.
Founded in 2002, NGE has grown into a successful environmental and geotechnical engineering firm with nearly 40 employees and offices in Pennsylvania and West Virginia.
They knew that the most feasible and lucrative option was likely to sell the business to a third party.
Over the years, Amy and John, who are also siblings, had offers from third-parties to sell them their engineering firm that focuses on geotechnical, drilling and environmental engineering services, but it never felt right.
“When you start a company from nothing, it’s like one of your children. Selling it to someone outside our company just felt wrong,” Amy, who serves as NGE’s CEO, said.
They knew there were other options for their exit strategy but weren’t sure if they would work for NGE. For example, growing up, Amy and John’s father was an early employee at Triad Engineering, a firm which became employee-owned through an Employee Stock Ownership Plan (ESOP) in the 1980s.
Kevin McPhillips, executive director of the Pennsylvania Center of Employee Ownership (PaCEO), said ESOPs are an option for business owners to sell to their employees without them having to personally come up with the money.
“It’s not uncommon to see employees get a second mortgage and clean out their savings in order to buy out the current owners. This can be quite a burden.” McPhillips said. “That’s why ESOPs are such an attractive alternative for companies like NGE. They allow Amy and John to be bought out while handing the keys to the people they trust the most—their employees.”
Formalized by Congress in 1974, ESOP companies take on debt to buy out the owners and divide the ownership shares among the employees (who pay nothing). And unique within the tax code, ESOP companies pay no tax on profits for whatever portion is owned by the employees. The employees work together to pay off the loan (supported by the tax savings) after which all future earnings are invested to grow the company and the value of the shares. Employees can then cash out their shares upon retiring or leaving the company.
Currently more than 300 companies in Pennsylvania are either partially or fully employee-owned. They include eastern-Pennsylvania-based plumbing wholesaler Nicklas Supply, and kitchen and bath solutions company Splash Kitchen Bath Home. Nationally, over 5,000 other companies have ESOPs.
Despite Amy and John knowing about ESOPs they didn’t think it was a viable option. They thought it was just for large companies, not ones with less than 40 employees like NGE.
“We didn’t feel like we were big enough for an ESOP,” Amy said.
Fortunately, Amy had recently joined the board of KTA-Tator, a Pittsburgh-based ESOP, and saw how versatile the business model could be.
Through KTA-Tator, Amy was introduced to Dan Zugell, a director at Business TransitionAdvisors, Inc. (BTA), a firm which has transitioned 17 businesses in Pennsylvania and 60 across the country since 2020.
“There are many misconceptions about ESOPs out there, including that a company needs to be a particular size. The reality is that a company with as few as 25 employees to a company with thousands of employees might be a good fit for an ESOP.” Zugell said.
Amy and John hired BTA in the fall of 2021 and transitioned NGE into an employee-owned company in November last year.
For Gene Brown, NGE’s West Virginia office manager, the ESOP is the ideal solution.
“I’m pretty excited about this thing. We have ownership without having to buy anything,” he said.
Brown said he’s already helping other employees understand how to act like owners.
“I’ve been telling them, we need to step up and do more. The more we do now, the more it will help our future,” he said.
For Amy, she plans to transition out of her role in two years, while John plans to stay for at least four so they can ensure the company can thrive into the future.
“It’s very satisfying to know I’ll have a comfortable retirement and that the legacy John and I started will continue to prosper and also provide for and reward our employees, many of whom have been with us long-term.,” Amy said.