A simple transaction involves only four parts. The bank makes a loan to the company. Usually this loan is made with an agreement that the company will make a "mirror loan" to the ESOP.

The company makes a mirror loan to the ESOP. Since the ESOP has no assets, the bank makes the loan to the company, secured by the assets of the company.

The company pays the original owners and is given either assets or stock in return.

The stock is then put into the ESOP.

A complex transaction involves one or more additional investors. In such a transaction: The outside investors give the company their equity investment in return for stock andthe bank makes a loan to the company.

The company makes the "mirror loan" to the ESOP.

The company pays the original owners and is given company assets in return. Or original owners' stock may be given directly to the outside shareholders and the ESOP.

Note: Both of these transactions are cases in which the money that purchases stock for the ESOP is borrowed or "leveraged." In leveraged buyouts, the stock which is given to the ESOP is placed in the suspense account. This stock is released to the individual accounts as the ESOP loan is repaid.