How is an ESOP valuation actually determined?

In Part 6 of the ESOP Boot Camp series, Trevor Gilmore and Ben Spadt break down ESOP valuation in simple, practical terms. This episode explains how fair market value works in an ESOP transaction, why cash flow drives value, and who ultimately determines the final price.

The discussion covers the difference between “price” and “value,” the role of independent valuation firms, and how trustees negotiate on behalf of employees to ensure transactions occur at arm’s length and at fair market value.

Topics covered include:

• What it means for an ESOP to be a fair market value buyer
• Why ESOPs are fundamentally cash flow buyers
• How EBITDA multiples are built from cost of capital
• The role of projections, financial history, and market comparables
• Who sets ESOP value in a transaction
• The trustee’s fiduciary responsibility
• The difference between value and price

This episode is designed for owners, CEOs, and CFOs who want a clear framework for understanding how ESOP valuations are determined before entering negotiations.