GRAND RAPIDS — Leaders of environmental consultancy Catalyst Partners LLC started transferring ownership of the firm to a group of its employees in December in what has been a years-long journey.
“This has been a very emotional process for all of us and very company-affirming,” said Catalyst Partners President Emeritus Keith Winn, who stepped down in 2022 from his role as president after 25 years, but remains involved with the company. “It’s a very big step for me to begin handing this over, but I have complete confidence in my team. It’s also affirming to see how they have embraced this opportunity and taken it on.”
The Grand Rapids-based firm went through the valuation process in 2017 and started working on a plan to transfer ownership to employees. Winn took a month off in March 2018 to research which employer ownership model made the most sense for Catalyst Partners, and started restructuring the business the following year before the pandemic halted the process.
“We were very fortunate to not have a significant slowdown in work during the pandemic, but people had their entire life kind of flipped upside-down, so we didn’t want to add an extra layer during that time,” said Amanda Brookes, president of Catalyst Partners. “In early 2021, we were able to pick it back up again.”
Ultimately, the team opted for a model in which the company remained an LLC but is taxed as an S-corporation. Scott Hill, executive partner at Varnum LLP who advised on the deal, said the new structure allowed the company to emphasize flexibility, tax efficiency, liability protection, control during the transition process and incentives for new employees coming into the ownership structure.
Catalyst Partners also pulled all of its employees into the process and took its time rather than rush into the new structure, Hill added. He characterized the new ownership as similar to an ESOP in that employees own stock in the company, but without some of the annual valuation requirements, he said.
“This gave us more flexibility and let us expedite the process,” Winn said. “ESOPs can be very costly to develop and there are legal commitments every year to have independent auditing. We found that to be more limiting and it doesn’t offer as much flexibility.”
Catalyst Partners currently has 19 total employees, and nine of them have partial ownership of the company. The ownership process is being phased in, and more units will be transferred to employees over time, Brookes said.
“The biggest benefit internally is that it gives us a path into the next phase of Catalyst Partners as a company,” Brookes said. “It allows our employees the path to ownership, which is something not a lot of employers offer. That is one of the main incentives for us: to make sure Catalyst Partners has a long-term path into the future, regardless of who is in a leadership position, because we are all leaders.”
Catalyst Partners specializes in helping developers earn energy incentives and certifications for projects, in addition to offering a range of other sustainable and cost-saving measures in the planning and building process. The company has both a B-Corp. and JUST certification, a social justice scorecard for companies that measures diversity and inclusion, equity and employee health.
Going through the B-Corp. certification process helped leadership at Catalyst Partners decide to consider employee ownership, according to executives. Pursuing employee ownership for Catalyst Partners has long been Winn’s vision for the firm, said Benjamin Glendening, the company’s director of business development.
“It’s been pretty seamless with the employees,” Glendening said. “It’s been really nice coming into a team where this is a thing: They’re open to this and are willing to work together to make it happen. It’s still going to take some work for all of us to carry it out and see it through, but with the legacy he’s handing us, we really want to do right by Keith.”
Winn remains the primary owner of the equity in the company, but will transition majority ownership to employees in the next five years at most, he said.
“It takes time to build consensus around the team and to build trust and understanding of what all of the complications and options are,” Winn said. “But it was time well spent because we all went into this with eyes wide open and a fully committed team.”
Winn talked to many other company leaders in the area that have pursued employee ownership to learn more about the process, he said.
In addition to Varnum, Grand Rapids-based accounting firm Goodlander, Swett and Rybicki also advised on the deal.
Being employee owned will also be a benefit in helping with talent attraction, Brookes said.
“It’s not something that’s offered to everyone on day one of employment — it’s a couple-year period before that’s opened up to new team members — but it is part of the conversation on day one,” Brookes said. “That opens up an opportunity that most people don’t ever have in their career.”