News & Events
Pennsylvania Center for Employee Ownership activities are intended to promote the stability and growth of the Pennsylvania economy by increasing awareness of the benefits of employee ownership for the businesses, business owners, employees, and communities of Pennsylvania.
News
Co-founders of manufacturing company tap uncommon exit strategy
After several would-be buyers took a pass on their manufacturing business, Tim Horning and Greg Kimble found an option that appealed to them far more than closing up and walking away from the company they built over a quarter century.
Horning and Kimble decided to sell Signature Vacuum Furnaces to its roughly 15 employees.
“It just seemed like a good fit,” said Horning.
The two entrepreneurs are not the first to sell a company to employees. But they are one of very few in the U.S. to pick a deal structure known as an employee ownership trust – and they appear to be the first in Pennsylvania, according to Kevin McPhillips, executive director of the Pennsylvania Center for Employee Ownership.
“It allowed them to, over time, get paid out for the business. It allowed them to keep their legacy. It allowed them to take care of the employees and make sure that they had jobs going forward,” McPhillips said. “And my experience has always been that people that engage in employee ownership, they want a liquidity event. There’s no question about that. But they want something else too.”
How does it work: Under an EOT, business owners sell their companies to trusts that operate for the benefit of employees, often through some form of profit sharing. The transactions are typically funded through loans and/or seller financing.
The structure is relatively common in the United Kingdom, which is home to about 2,500 employee ownership trusts, or EOTs.
There are about 40 EOTs in the U.S., according to a February report by the U.S. Department of Labor.
Horning and Kimble initially discussed another option for Signature Vacuum, a Crawford County-based company with about $3 million in annual revenue.
That would be the employee stock ownership plan, or ESOP, a more common path to employee ownership. There are more than 6,400 ESOPs in the U.S., according to the National Center for Employee Ownership.
But the structure would not have been a good fit for Signature, said Jeff Parnell, an Erie-based consultant who worked with the two owners on their transition plan.
Why not: ESOPs can be more costly, making them a better alternative for bigger companies, said Parnell, who was a C-suite executive for three decades before he turned to consulting.
As he explored options for Signature, Parnell connected with McPhillips and then with an organization called Common Trust that specializes in EOT transactions.
“They are rock stars in this space,” said Parnell, who does business as JHP Advisors.
The background: Horning and Kimble met in the 1970s and connected over shared values and beliefs while working for the same manufacturer in northeastern Pennsylvania.
They eventually moved on to other endeavors but reconnected in the 1990s.
Kimble was working as an independent manufacturers’ representative for several companies and, seeing a need in the market, approached Horning about starting a business to make industrial furnaces.
They incorporated Signature Vacuum in 2002 and began building their first furnace right on the customer’s floor, with customer financing, Horning said.
They eventually found vacant industrial space in Adamsville, about 50 miles south of Erie.
“We bought it for a song, and it has been a godsend,” said Kimble.
The company makes furnaces used in industrial processes, primarily for metals and ceramics.
An example of the kind of industrial furnaces made by Signature Vacuum Furnaces. (photo/submitted)
They started discussing succession plans about two or three years ago as Kimble began eyeing retirement. They had no children interested in the business.
Kimble has already sold 10% of his shares to the trust, and the two owners plan to sell more over time.
Parnell, meanwhile, is helping Signature’s employees embrace the new model. He works with them to find their voices, for example, and weigh in with their own ideas for the company.
“You don’t want it to be a transaction that sounds good with no real meat behind it,” he said. “My whole approach was, let’s make sure this sticks and it gels.”
The trend: Millions of baby boomer business owners are expected to retire in the years ahead.
McPhillips said he has heard from state and local officials worried about what might happen to their companies — and the local economies that rely on them.
“They’re realizing that there’s this hole in the boat, and they’re trying to figure out what to do about it,” McPhillips said.
An EOT is an option for many smaller businesses, he said. But the structure may remain something of a niche until it draws stronger backing from lenders, such as banks, the SBA and community development financial institutions, McPhillips said. The first EOT in the U.S. was born just 12 years ago.
“The kinds of funding organizations that would support these don’t understand it,” McPhillips said. “It’s new.”
The PaCEO Celebrates EO Month,
and the Introduction of the
Office of Employee Ownership in Pennsylvania!
On October 26, 2022, Pennsylvania celebrated Employee Ownership Month with a Press Conference in the Capitol Rotunda in Harrisburg, PA.
The celebration included a Citation honoring the Pennsylvania Center for Employee Ownership, but more importantly, the formal introduction of PA House Bill HB-2888, establishing a Pennsylvania Office Of Employee Ownership, and the introduction of the Pennsylvania Employee Ownership Assistance Act.
The bill, when passed, will create an Office of Employee Ownership within the Department of Community and Economic Development (DCED) whose charge is to actively raise awareness about the benefits of EO, and provide informational, technical, and financial assistance to new and existing employee owned companies throughout the Commonwealth.
The Bill is the bipartisan work of Rep. Sara Innamorato (D-Allegheny), Rep. Greg Rothman (R-Cumberland) and the Pennsylvania Center for Employee Ownership. It has been assigned to the House Commerce Committee for deliberation.
The bill is designed to promote and help with Employee Stock Ownership Plans (ESOPs), Worker Cooperatives, Employee Ownership Trusts (EOTs), as well as “other employee ownership organizations”, as determined by the Secretary of the DCED.
The Measure also creates a “Pennsylvania Employee Ownership Advocate”. This is a gubernatorial appointment, reporting directly to the Governor, who will be responsible for budgeting in a series of specific areas including Loans, Loan Guarantees, and Grants (for smaller enterprises). Further, the Advocate will be responsible to ensure that the DCED is thoroughly completing the requirements of the Act and determining additional legislation necessary to enhance and advance EO within Pennsylvania.
In the successful Press Conference last week, numerous elected Officials attended to support the legislation and focus on a unique and critical issue. – Bipartisanship. Members of the General Assembly from both sides of the aisle took the opportunity to emphasize the bipartisan nature of not just this Bill, but of Employee Ownership as a whole.
In a time of frequent national and local divide, Members can sit together and improve our world in a united way.
In a joint statement released by Co-Sponsors Innamorato and Rothman they said:
“In the next ten years, nearly 2.5 million businesses headed by baby boomers that employ 25 million people will be looking to transfer the ownership of their company.
“Converting these businesses to an employee ownership model could be a viable solution to allow an owner to strategize their exit while keeping the company and the jobs in the community and honoring the business owner’s legacy. “
Innamorato and Rothman said that with dedicated resources, Pennsylvania could be a leader in helping workers take over the business, gain an ownership stake, reorganize it, and navigate a successful path forward by adopting an employee-owned model.
“Our legislation will establish the Office of Employee Ownership within the Department of Community and Economic Development (DCED) to do just that. The expressed goal of the office is to provide educational, financial, and technical assistance to existing employee-owned companies and those firms seeking to retain jobs by restructuring an existing business into an employee-owned enterprise.
“Keeping and growing Pennsylvania-based companies is paramount to the economic success of our Commonwealth. Through the expansion of employee ownership enterprises, we can assist in creating an economic climate that is good for workers, good for business owners, and good for the host community.”
They asked State Reps to join in assisting Pennsylvania workers in grabbing an opportunity to reorganize their workplace, salvage local businesses, and improve the economy through employee ownership.
In last week’s event at the Capitol, Rothman remarked that,
“When people own something, they care about it more. They dig deeper roots. They want to see it succeed.”
In addition to the elected officials, the Press Conference heard from Dr. David Finegold, President of Chatham University in Pittsburg, and the creator of one of the nation’s first academic Chairs in Employee Ownership, while serving as Dean of Academics at the Rutgers University Graduate School of Labor and Business Management.
Also speaking were Rebecca James, VP of Communications and Marketing at HB-Global, a 100% employee owned firm in Harrisburg, which has grown from 195 employees to over 2,000. Kevin McPhillips, Executive Director of the PaCEO moderated the event, and PaCEO Board Member, Charita Bush, Training Manager at KTA-Tator, gave perhaps the most compelling reason for support of EO, when she shared her personal story, and what employee ownership has done for her, her family, and her organization
In the past 5 years Pennsylvania has been a leader in advancing new employee ownership. In 2015, PA was in the middle ranking of States in creating new Employee Owners, yet over the past 5 years, based on the latest US Labor Department 5500 data, they have been second in the nation, behind only California, with 3 times the population. And in a recent survey by Certified EO, they have 3 Cities in the top 25 cities in the US for Employee Ownership (Pittsburgh, Harrisburg, and York) with Harrisburg ranking 3rd in the nation.
Separately, the PaCEO has created the nation’s first Citywide Task Force on Employee Ownership, which in Q1 of 2023, in conjunction with Pittsburgh City Government and Chatham University, will approach 30,000 businesses with the message of the value and benefits of Employee Ownership. This city supported effort will also include coordination with 30 Pittsburgh Community Groups, who will hold informational sessions, conducted by the nonprofit PaCEO, to introduce all forms of employee ownership to the neighborhoods and Districts in Pittsburgh.
It is a genuinely exciting time for EO in Pennsylvania, with much work to do, and much hope for a better future for all.
For more information, please contact Emalie Martzall at emalie@paceo.org.
Where in the world is the PaCEO?
NCEO Conference
April 14-17, 2025
Lehigh Chamber of Commerce
March 25, 2025
Employee Ownership and B Corps
January 16, 2025