Four long-term employees get the chance of a lifetime to own company they worked for since the 1990’s

Arizo Executive Team and Tomas Duran of Concerned Capital (far right)

Paramount, California — January 28, 2015 — Ariza Cheese Company, Inc. has been purchased by four key employees; saving 24 manufacturing jobs in the heart of Paramount, California. Ariza is a producer of artisan Mexican Cheeses — Panela, Queso Fresco and Cotija — and was the first minority owned company to sell these distinctive cheese products in mainstream grocery stores throughout Southern California. This led to the widespread market acceptance of Mexican cheese. The company relies on ‘old school’ artisan craft production techniques to ensure the quality and consistency of its products

Ariza Cheese Company, Inc. was established in 1970, by Ausencio Ariza, who actively managed it until his death in 2009, following a long illness. Pablo Gonzalez, a 25-year employee of the company took over plant management at that time and the founder’s daughter, Mimi Fitzsimon, took care of the books and business side from her residence in Sacramento. Committed to the wellbeing of the company, key employees began a savings and investment program with the hope to eventually buy and revitalize the Company.

Ariza was purchased ‘lock, stock and barrel’ on January 23rd by its employees using the services of Concerned Capital. Concerned Capital, an LA based social benefit corporation, pioneered a ‘transfer of ownership’ methodology designed to benefit both buyers and sellers. It also promotes wealth creation by workers in low-income communities and saves jobs. As a result of using this method, the Ariza Family was also able to reduce their tax liability from the sale of their company.

The new owners are: Pablo C. Gonzales 55, Jesus Perez 50, Jose Luis Gomez 53, and Jorge Barillas 40 — Formed a “Collectiva” last April and retained Concerned Capital to facilitate the transfer of ownership. “We knew we could buy the company but we didn’t know how to do it. Concerned Capital gave us a roadmap” said Collectiva President and plant manager, Pablo Gonzales. Collectiva members wrote a business plan and Concerned Capital assisted them with finding the working capital for the take-over. The Company was identified ‘at risk’ for closure by the Los Angeles Economic Development Corporation thru its Lay-off Aversion initiative.

Demand for Ariza’s bestselling Cotija Cheese has been unmet because of limited investment in the company. The plant currently operates at about 30% of capacity, with a recent workforce drop from 40 employees to 24. Larger customers — including King Taco, Super A Foods, and Boys Market — have all placed new orders to encourage more production. The company hopes to start hiring in the Spring of 2015. The plant is located at 7602 Jackson Street in Paramount, California.

For more information about Concerned Capital and the other employee owned companies it has assisted please contact: call Tomás Durán or Bruce Dobb (213) 787–4532.

By Bruce Dobb, Partner at Concerned Capital and Kathleen Minogue, Founder of Crowdfund Better

Asking a commercial bank for a loan can be an intimidating, time consuming and difficult experience. Banks often get pitched by young companies that have no demonstrated market (not even a wait-list of customers), no beta-tested product prototype, and no proven management structure.

Most young companies can’t get a loan — not even from nonprofit lenders — because most banks won’t even consider deals with less than 2 years of profitable tax returns, let alone a company that has only losses to show for its start-up phase.

Much of what banks look for is what common sense demands if you’re not a clairvoyant. How can anyone predict who will repay a loan in the future? It’s only by looking at track record, history…

You may already know the best buyer

What’s the best way to sell your business? For most small business owners the advice from ‘experts’ doesn’t apply to them. We walked in on a gathering of ‘exit planners’ that was filled with CPA’s, lawyers, investment advisors and business brokers pontificating on…

First Step for Employee Buyout: Letter of Intent

By Tomas Duran and Bruce Dobb

By far the saddest call Concerned Capital receives is from employees or members of a ‘collectiva’ at a privately held company that have just learned their company was sold; in some cases, for a price with terms that these employees could easily have afforded with their savings. Sometimes the employees are already discussing purchasing the company but because they have not executed a “Letter of Intent” (LOI), a competitive marketplace and a secretive outside suitor beats them to the punch.

Trying to buy a company without first securing a signed Letter of Intent from the owner is like leaping out of an airplane with a parachute. The LOI creates an exclusive right to study the deal and arrange for the purchase. Without it, the employees may not survive in the transaction long enough to even get a chance at purchasing the company. Even in cases where their bid is more favorable tax-wise and affords a more optimal solution for the owner, an employee bid without an LOI is a high risk proposition.

Without an LOI, a third-party sale can occur during negotiations. Many employee ownership advocates spend lots of time discussing ownership structure, legal consequences and finance without having a signed LOI. All of these things can be addressed after an LOI is signed and the company is effectively taken off the market for a period of due diligence.

An LOI is a signed document that declares the intentions of both parties to negotiate the purchase of a business in good faith. It’s the document created before the Purchase Agreement is signed and sent to escrow for closing. The following are the key elements of a Letter of Intent:

• Puts in writing the key deal points — price, terms and expected close date — can be defined as specific or given a range.

• Identifies deal breakers — i.e. if the owner plans to compete with a buyer in less than 12 months

• Identifies parties to the transaction (buyer may latter chose to modify or expand its numbers, subject to buyers approval).

• Sets up a framework or ‘roadmap’ for the transaction to occur

• Grants exclusivity for a specific period of time to the buyer (the one binding element of an LOI )

• Can be used for financing to demonstrate ‘secured’ interest

• Creates a sense of obligation to complete a transaction as agreed to

• Allows for ‘due diligence’ on terms agreeable to both parties

• Establishes confidentiality

• Does NOT create a legal obligation to purchase the company

When employees make an offer to the business owner they have several distinct advantages. Goodwill and a history together may mean the owner is more willing to carry paper. The employees know the problems and where the bones are buried, but they also know secret assets of the company and understand the customer base and its needs better than anyone. And that means that they may be willing to take over the entire corporation ‘lock, stock and barrel’ providing the seller a tax break by converting the ordinary income from a sale of ‘assets only’ to capital gains which comes from the sale of stock.

The problem is that employees often don’t even get to the starting gate before the company is sold out from under them — especially if it’s an investment worthy company.

Finding sustainable companies that make money and have a solid chance of outliving their current management is a difficult task at best. Seasoned professionals in the field look at 10 companies before they decide to bid on one. Only 20% of companies listed ever sell. The famous industry adage is: ”Good companies are never sold — they’re always bought.”

This situation pits employee buy-out advocates squarely against a cadre of speculators, investors and others who can act quicker, pay more and out-maneuver amateurs. To level the playing field, co-op advocates have to learn to beat the pros at their own game.

As Holly Magister writes in “4 Reasons It’s So Hard To Buy A Good Business” (Forbes-February, 23, 2016) “When business buyers are looking for a good business to buy, they look for businesses which can run on their own without day-to-day input from an owners.” This is an axiom that every speculator, investor, acquisition scout and business broker understands and looks for. Of course co-op developers, employee ownership advocates and community organizers are all looking for these companies as well.

Concerned Capital believes the best place to start is to identify employee groups that want to own the company they work for. The Silver Tsunami myth is that harried ‘baby boomers’ will be more than glad to offer their companies for sale. Waiting for sellers to step forward means unnecessarily constricting the employee buy-out marketplace to financially troubled companies where the owner needs to sell or, alternatively, restricting it to a limited number of employee friendly owners who share ‘progressive politics’ with advocates.

Employees often don’t even get to the starting gate before the company is sold out from under them — especially when it’s an investment worthy company because the marketplace for the sale of businesses is highly competitive. Which brings us to:

The Parable of the Parachute Trainee:

A young trainee was getting ready for his first high altitude parachute jump. …

Concerned Capital

Concerned Capital is a social benefit corporation that specializes in social impact investments. We strive to create and save jobs by directing capital to low

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