Succession Planning
There are a growing number of successful business owners in their 60s/70s, increasingly concerned about their succession plan.
If the owner has children, they can be an obvious option. But many won’t have the inclination, or the skills, to take over the family business.
A Management Buy Out (MBO) used to be a common option. Where the up-and-coming 30 to 40-year-olds buy the shares from their 60 to 70-year-old seniors.
However, with house prices the way they are relative to wages, this is no longer a viable option for many.
Many employees, even fairly successful ones, will be struggling to cobble together a deposit for a modest flat, no ability to raise £00’000s to buy shares in the company they work for!
A trade sale can be a great option. Some external third party who has the cash buys the business from you.
It certainly has its place, but some founders will fear the changes it will bring, to the business itself, and the employees. Often the brand will be absorbed, and some staff made redundant due to “synergies”.
How the EOT Model Can Help
The Employee Ownership Trust (EOT) model can help alleviate these issues.
- No staff members have to buy shares. The EOT pays the founder from company profits. Hence no employees will be left out due to their personal financial circumstances. This can help the business be run by the best people for the job, not simply those who have the personal wealth to buy in.
- The business will be run for the benefit of all employees, present and future. It will remain independent. Typically the brand will continue as is, and employees will be well looked after. This can help the founder provide a legacy, potentially helping to provide for many generations to come.
- As if the above wasn’t enough, the sale is tax-free! Combine this with the reduced due diligence, plus control of sale timeline, and it can make it a very appealing option for founders as their route out.
Are you one of the silver tsunami? Think an EOT might be a good option for you? Get in touch!