Selling Your Company to an Employee Ownership Trust (EOT)

Independent realistic market-based valuations for selling your company to an EOT

Leave an enduring legacy for your company and staff

Exit solutions for owner managed SME businesses with revenues of £750k to £15m

Thinking of Selling Your Company to an Employee Ownership Trust?

Selling to an employee ownership trust is becoming an ever more popular way for SME business owners to exit, and for good reason.

Is selling to an EOT suitable for you and your company? Here is a brief list of the Pros and Cons:

Pros:

1. No need to go and find an external buyer – whether Trade or Private Equity
2. Secure the future for your employees and leave a legacy for the long term
3. Achieve a full value for your company based on an independent business valuation
4. Zero Capital Gains Tax (CGT) on the proceeds of the sale to an EOT

Cons:

1. Limitations on ownership and directors’ shareholding and management structure
2. You still need to address succession if you are in charge of day-to-day operations
3. Proceeds from the sale are dependent on what the company can afford to pay and tend to be paid over a longer period of time
4. Potential complexity when taking strategic decisions and raising growth finance

Which sectors are typically suited to Employee Ownership?

There are numerous well-known Employee Owned companies - John Lewis, Richer Sounds to name but a few. Larger businesses will have the succession plans and infrastructure in place already to enable Employee Ownership. But what about owner managed SME businesses?
Many SME businesses (in the £1m to £15m revenue bracket) are dependent to a great extent on the business owner for leadership, client & supplier relationships and strategy – With professional or skills based service firms, qualified responsibility for projects delivered often lies with the owners/partners of the firm too.
Identifying succession for these key roles is very important when moving to employee ownership. Skillsets and mindsets of the employees will be a determining factor in the success of moving to Employee Ownership.
Sectors we believe are best suited to Employee Ownership are knowledge and skills based service firms, such as Architects, Structural & Civil Engineers, Niche Sector Consultancies, Legal Practices, and Accountants. Construction, Facilities Maintenance, and Manufacturing companies can also be contenders where a strong tier2 management team is in place.

Process for selling to an Employee Ownership Trust – What is involved?

When selling your business to an EOT, the key steps are generally as follows:
  1. Your company sets up the legal entity of an Employee Ownership Trust (EOT)
  2. You commission an independent valuation of the company
  3. You / the current shareholders agree a contract for the sale of the company shares to the EOT at a fixed price based on the independent valuation.
  4. The company transfers funds to the EOT in order to pay the consideration to you / the outgoing shareholders
Deals are often structured with an upfront payment on completion followed by deferred payments funded by the company’s cash reserves, asset finance (if necessary) and ongoing cash flow.

Who to talk to first and why Hornblower

In deciding whether selling to an Employee Ownership Trust is right for your business, we believe it is essential to look at all the options. Our expertise is identifying the right exit solution for you.
Over recent years, Hornblower has sold over 70 businesses. Indeed, we sell over 80% of our sale assignments. So we know what businesses are sold for in real life and who to? We can tell whether a business is well placed for a trade sale or whether it is better suited for management or employee take-over.
We also know how to maximise the value of your exit at the same time as leaving a legacy and job security for the employees who have helped you build your business over the years.
We are able therefore to advise on how you exit your business whether by selling to a Trade Buyer or Private Equity, Management Buy-Out (MBO) or by selling to an Employee Ownership Trust (EOT). As a result, we can devise the most appropriate strategy for you and your company from the outset.

Business valuations for Selling a Business to an Employee Ownership Trust

We are always happy to work alongside your professional advisors – accountants, wealth management advisors, EOT specialist commercial lawyers, or commercial finance brokers.
If you are a professional advisor assisting your client with the transfer of their company to Employee Ownership, we would be delighted to offer our Independent Business Valuation service.

Next Steps: Find out whether selling to an Employee Ownership Trust is right for your company?

Complete the enquiry form.
We will contact you within 2 hours to arrange a time to review your situation – free and without obligation and we would be happy to sign a confidentiality agreement.

Request an EOT appraisal

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