Sterling Engineering, an engineering support services and technical staffing firm headquartered in Westchester, Ill., transitioned to an employee stock ownership plan in December, announced CSG Partners, a New York-based investment bank that advised the firm.

An ESOP is a retirement benefit that enables participating employees to earn shares of stock in a company where they work through a qualified trust fund. Through the ESOP, Sterling employees will earn shares of stock in Sterling each year. Employees who have worked for the company for at least one year and work at least 1,000 hours in a given year will become eligible to receive ESOP benefits.

Terms of the transaction were not disclosed. Dolores Connolly remains CEO, and the management team stays in place.

“We are very excited to be moving into the next chapter of our company’s history in a way that will take our successful business model to a new level,” said Connolly. “Sharing ownership with employees through our ESOP enhances our strategy of retaining top-talent to serve our customers.”

CSG Partners was involved in structuring, negotiating, and raising capital to support the transaction. The investment bank has closed other ESOP transactions for staffing firms including Internal Data Resources, Hamilton-Ryker, Penmac Staffing and Burnett Staffing.

“There has been a significant trend with staffing companies selling to ESOPs,” said George Thacker, Managing Director at CSG. “It is a liquidity transaction that is an alternative to doing a traditional M&A transaction.”

The format allows prior owners to remain with the firm and provides a host of tax incentives, with businesses becoming tax-free when owned 100% by an ESOP, according to Thacker. “All of the cash flow that used to be lost to taxes now stays inside the company,” he said. “It can be a great strategy for owners, companies, and their employees.”