Podcast Summary: Building Value Through ESOPs and Long-Term Strategy with Thomas Mallon (Becker Business, 12-2-25)

Podcast: Becker Business
Host: Scott Becker
Guest: Thomas Mallon, Founder of Regent Surgical Health & Perpetuate Capital
Date: December 2, 2025
Episode Focus: Exploring the power of ESOPs (Employee Stock Ownership Plans), long-term business strategy, and the lessons learned from Tom Mallon’s entrepreneurship journey.

Episode Overview

This episode delves into the unique approach Thomas Mallon and his partners have taken in building and exiting businesses through ESOPs, rather than traditional private equity or strategic buyouts. Mallon recounts the highly successful ESOP process at Regent Surgical Health, describes the origin and model of Perpetuate Capital, and shares deep insights on business transitions for the Baby Boomer generation, the intricacies of financing, and wisdom for today’s business leaders.

Key Topics and Insights

1. Introduction and Background

• [00:00–00:49]
  • Tom Mallon: Harvard Business School graduate, previously built Regent Surgical Health, which he exited via an ESOP, and now leads Perpetuate Capital—a firm built on facilitating similar ESOP transactions.
  • States the evolution of Perpetuate Capital directly emerged from the positive experience of selling Regent to an ESOP.

“We created 13 millionaires out of 42 employees. And it was just an amazing experience.” – Tom Mallon [01:44]

2. How ESOP Financing Works

• [02:16–06:17]
  • ESOP Structure: Consists of layers: senior bank debt, seller financing, and mezzanine (middle) financing. Traditional mezzanine capital was too expensive and inflexible for Regent.
  • Innovative Approach: Brought in doctor partners to fill the mezzanine financing gap—offering better terms than standard market options and leading to a more beneficial structure for all involved.
  • Creation of Perpetuate Capital: After Regent's successful ESOP exit, investors wanted to find more reasonable ESOP-based investments; Perpetuate was formed to meet this need.

“We operate at 8 to 9% versus 12 to 14%. And the warrant income from our loans will protect us against inflation. So that’s really why we started Perpetuate Capital.” – Tom Mallon [05:44]

3. Boomer Business Transitions and ESOPs

• [06:49–08:07]
  • Market Opportunity: $13 trillion in mid-cap equity is expected to transition as Boomers retire.
  • ESOP Advantages: Allows founders to cash out comparably to private equity, stay involved as board members, and oversee successor selection—retaining company culture and continuity.

“With an ESOP with Perpetuate Capital money in the middle, it’s about the same [as PE and strategic sales]. Plus, the seller gets to stay in and control the board... That’s the magic of what we do...” – Tom Mallon [07:36]

4. Lessons from Regent Surgical Health

• [08:07–10:47]
  • Long-Term Thinking: Success comes from building relationships over years, taking a consultative approach, and helping companies objectively compare ESOPs to other exit options.
  • Hands-On Advisory: Perpetuate does feasibility studies for companies to transparently demonstrate ESOP implications, pointing out both the strengths and areas to improve before selling.

“Keeping in touch with people, not pushing them... just letting them, giving them the information and letting them stew on it for as long as they need to stew on it. That’s what we do.” – Tom Mallon [10:27]

5. Navigating Market Cycles & Industries

• [10:47–13:09]
  • Adapting to Valuations: In 2021, valuations were too high for acquisitions; market reality has since normalized, especially in healthcare and previously out-of-favor sectors like oil services.
  • Niches of Opportunity: Healthcare (stable, growing), telehealth, and select oilfield services now present compelling investment cases.

“People’s expectations have come down... Healthcare still has that stable revenue and growing income in many little niches...” – Tom Mallon [11:33]

6. Ideal ESOP Partner Company

• [13:09–14:21]
  • Steady Performers: Perpetuate seeks companies with recurring profits, strong cultures, and loyal customers—capable of sustaining new debt structures.

“It has to have that steady income and growing profits and it has to have a strong culture and customers that love them...” – Tom Mallon [13:53]

7. The Human Impact of ESOPs

• [14:21–16:29]
  • Wealth Creation: Regent’s ESOP turned many rank-and-file employees into millionaires, not only executives. Life-changing impacts included providing lasting security for employees and their families.

“Those women, if they were with us from the beginning of the ESOP till the end, they ended up with between 4 and $600,000 deposited in their IRA accounts.” – Tom Mallon [15:13]

“One lady... after the deal closed... got $2.1 million. She sends me an email that said... she now will not have to worry about who takes care of her daughter after she’s gone… Those kind of outcomes you can’t minimize. I mean, they’re just life changing.” – Tom Mallon [15:39]

8. Advice for Entrepreneurs

• [16:29–19:08]
  • Start Doing: Take any opportunity to get your foot in the door—even if the work is unglamorous.
  • Solve Problems: Be attuned to problems you can solve; that’s where real value is created.
  • Persistence and Openness: Success is built by being useful and alert for innovative solutions.

“You just have to be willing to do whatever it takes and then keep your eyes open for problems that you can solve... That is really the magic of it.” – Tom Mallon [17:55]

9. Philosophy on Leverage and Tax Advantages

• [19:08–21:30]
  • Conservative Debt Ethos: Mallon prefers minimal leverage, but ESOPs uniquely convert what would be tax payments into debt repayments—rapidly building equity value.
  • Major Tax Benefits: Companies pay no federal tax post-ESOP; sellers can defer capital gains by reinvesting in US stocks and bonds.

“...When you become an ESOP, there are two major tax advantages for the company… The company no longer pays federal income tax... those [funds] paid down our debt and in two and a half years we paid down our seven year note...” – Tom Mallon [19:59]

“...When a seller sells to an esop... he can reinvest his proceeds in stocks and bonds of US Companies and not pay capital gains tax... that’s what usually puts us over the hump when it’s when we’re compared to a private equity deal.” – Tom Mallon [21:12]

Memorable Quotes

• “We created 13 millionaires out of 42 employees.” [01:44]
• “We’re just substituting federal income tax for debt repayment. And this really builds the equity value for the company which then increases the value of our warrants when our loans are repaid.” [20:38]
• “Those kind of outcomes you can’t minimize. I mean, they’re just life changing.” [15:57]
• “You just have to be willing to do whatever it takes and then keep your eyes open for problems that you can solve.” [17:55]

Notable Segments and Timestamps

• [01:00] – The genesis and impact of Regent Surgical Health’s ESOP
• [03:20] – How the Perpetuate Capital model was shaped and why “middle-market” ESOPs often fail
• [06:49] – The coming retirement wave and options for business-owning Boomers
• [08:30] – The patient, consultative sales approach that transfers to Perpetuate’s strategy
• [11:04] – Adapting to changing market conditions and sector views
• [15:13] – The profound, individual impact of ESOPs on employees’ lives
• [17:55] – Real-world wisdom for aspiring business leaders
• [20:00] – How ESOP tax advantages unlock value and equity growth

Tone and Style

Conversational, candid, and rich with real-world examples. Mallon’s tone is humble and pragmatic, focused on service to both employees and investors, and punctuated by heartfelt stories—particularly about the life-changing effects ESOPs can have on everyday employees.

Conclusion

Tom Mallon’s insights cut through financial jargon to spotlight the transformative potential of ESOPs—not just as a business exit strategy, but as a tool for long-term growth, employee empowerment, and win-win outcomes. His advice underscores humility, hands-on leadership, and innovating for mutual benefit, making this episode both practical and inspiring for entrepreneurs and executives considering their own long-term legacy.