PL3 Virtual Roundtable Recap: Too Small to ESOP? Closing the Scale Gap Through Syndication
- William Gladhart
- Jun 20
- 5 min read
Summary: Many successful businesses are too small to attract buyers and too small to support traditional ESOP structures. In this PL3 Virtual Roundtable, William Lindstrom explores the "Scale Gap" and how syndication may help business owners create scale, preserve employee ownership, retain community wealth, and unlock new pathways to liquidity, succession, and exit readiness.
Roundtable Date: June 18, 2026
For many small business owners, exit planning often feels like a binary choice...sell the company to an outside buyer or don't sell at all.
While Employee Stock Ownership Plans (ESOP) have long provided an attractive alternative for owners who want to transition ownership to employees, the reality is many businesses never reach the size necessary to make a traditional ESOP practical. At the same time, those same companies may also be too small to attract institutional buyers.
During PL3's latest Virtual Roundtable, host Will Gladhart sat down with William Lindstrom, CEO of The Culture Think Tank and doctoral researcher at Vanderbilt University, to explore a growing challenge facing the lower-middle-market and Main Street businesses: the scale gap.
The discussion examined why so many successful companies find themselves stuck between traditional exit options and whether syndication could create a new pathway for employee ownership and liquidity.
Understanding the Scale Gap
Much of Lindstrom's research began with a simple question: Why do so many otherwise successful businesses fail to transact?
After conducting more than 150 interviews with business owners, advisors, wealth managers, exit planners, and valuation professionals, a pattern emerged.
For larger companies, failed transactions are often linked to familiar concerns such as customer concentration, leadership dependency, supplier concentration, or operational risk.
But for smaller businesses, the issue is often simpler - they are too small. Many companies generating $250,000 to $1 million in EBITDA are healthy, profitable, and well-managed. Yet they remain below the size thresholds typically sought by private equity groups, strategic buyers, and institutional investors.
Meanwhile, buyers in the lower middle market often begin searching for opportunities in the $3 million to $5 million EBITDA range and above. The result is a significant market gap between companies that want to sell and buyers willing to acquire them.
As Lindstrom described during the discussion, the problem is not always company quality - in many cases, it is simply a matter of scale.
The ESOP Gap
The conversation then shifted to employee ownership. ESOPs were created to provide business owners with a pathway to transition ownership to employees while preserving company independence and rewarding the people who helped build the business.
The structure offers meaningful benefits to all parties involved:
Owners gain a tax-advantaged exit strategy
Employees receive an ownership stake and retirement benefit
Communities retain locally owned businesses, jobs, and economic activity.
Yet despite these advantages, ESOP adoption remains relatively limited.
One of the primary reasons is that many businesses are too small to support the economics and administrative requirements of a traditional ESOP. While every situation is different, companies often need substantially larger employee populations and revenue bases before an ESOP becomes practical.
As a result, many owners who would prefer employee ownership over a traditional sale never seriously explore the option – this creates what Lindstrom described as a second scale gap.
Companies may be large enough to matter to their employees and communities but still too small to support employee ownership structures on their own.
Syndication as a Potential Solution
To address the original scale gap, Lindstrom developed what he refers to as the Syndicate Value Acceleration Model.
The concept is straightforward - rather than attempting to grow a single company from $500,000 in EBITDA to $5 million in EBITDA, multiple independent businesses could collectively create the scale needed to attract buyers.
By organizing companies together while allowing them to maintain operational independence, owners may be able to access opportunities that would otherwise remain out of reach.
The same logic, Lindstrom suggests, may apply to ESOPs. If multiple businesses can collectively create scale for a transaction, could they also collectively create the scale necessary to support employee ownership?
While the concept remains under development and additional legal and regulatory work is still required, the idea introduces a new way of thinking about the employee ownership challenge.
Instead of asking whether a single company is large enough for an ESOP, owners may eventually be able to ask whether a group of businesses could achieve the necessary scale together.
Why Diversification Matters
One of the more surprising insights from the discussion involved diversification. Traditional syndication models often focus on combining similar businesses within a specific industry.
A syndicated ESOP may benefit from a different approach. Rather than assembling identical companies, a portfolio of diverse businesses could potentially reduce risk by spreading exposure across industries and economic cycles.
A manufacturing company, service business, distributor, and specialty retailer may experience different market pressures at different times.
Together, those differences could create greater overall stability than a collection of identical businesses. In many ways, the concept resembles the logic behind portfolio diversification in investing.
The objective is not simply growth - It is resilience.
Preserving Community Wealth
Perhaps the most compelling portion of the discussion focused on community impact. When a locally owned business is sold to an outside buyer, ownership, profits, and future economic benefits often move elsewhere.
For many founders, that outcome creates concern. They want liquidity and retirement security, but they also want to preserve jobs, maintain local influence, and protect the communities they helped build.
Employee ownership offers a potential way to accomplish both objectives. Employees gain an ownership stake, and owners gain an exit path. Communities retain businesses, tax revenue, and economic activity.
If syndication can help smaller businesses achieve ESOP viability, the implications could extend beyond individual transactions. It could create new opportunities for communities to retain wealth, ownership, and long-term economic stability.
A Third Path?
The central question of the roundtable session was not whether syndicated ESOPs exist today...the question was whether they could!
For decades, many owners have viewed their options as limited to liquidation, family succession, or sale to an outside buyer.
The syndication concept introduces the possibility of a fourth option - a pathway where independent businesses work together to create scale, support employee ownership, preserve community value, and provide founders with liquidity.
Much work remains before such models become commonplace. Legal structures, governance requirements, valuation methodologies, and regulatory considerations must all be addressed.
Yet the conversation highlighted an important reality - many business owners have never explored employee ownership because they assume they are too small.
As Lindstrom noted during the discussion, the better question for founders to consider is: What if your company were ten times bigger?
The answer may reveal opportunities that many owners have never considered.
Will Gladhart is Chief Marketing Officer at The PL3, where he leads brand strategy, content creation, and community engagement.
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