Selling your business? Find out why Heatherlea and Smiths of Greenock became employee-owned

The first ‘Selling your business’ masterclass in the series kicked off with Ralph Leishman from 4-consulting talking through all ownership succession options before focussing on employee ownership – and how to ensure the employee buyout is a smooth process. We then heard from Kevin Shaw from ‘Heatherlea‘ – one of Britain’s leading wildlife holiday operators and Keith Wilson from ‘Smiths of Greenock‘ – a school, dancewear and club uniform supplier share their experience of moving their companies into employee ownership.

You can view the recording of the webinar below.

The full webinar presentation can be viewed here:  FINAL Selling your business masterclass presentations 12.09.24

Question and Answers

Q. What is the best way to get the EO funded, what would be the best option?
A. There are 3 main funding options: Deferred Consideration, Bank Loan and EO Specialist Investor. However, most deals are funded through initial extra cash that’s available in the business or has been built up over a couple of years prior to doing the deal. And then payment of deferred consideration of out of future profits over usually 5-7 years.

Q. Other forms of deals such as a trade sale can be adversarial with the contract disclosures and warranties etc. How is that kind of thing tackled in the employee ownership model?
A. Typically, employee ownership deals are much smoother, take less time and are less financially costly than other deals. The senior management team will have had oversight of operations and reports on the business. They may not know as much as the directors and shareholders who are who are selling, but they will know good deal of it and therefore there is much less need for extensive warranties.

Q. Where do you even start to consider a valuation?
A. The valuation is done by production of an independent audit, and which is only then presented to HMRC for approval.

Q. Any ideas on approximate costs to go through the process? e.g. legal fees/consultancy etc?
A. There is not one fixed price, the costs will depend on the size and complexity of the deal, however the fees will be nowhere near the costs of a trade sale nor will have the same hassles of the due diligence and warranty negotiation.

Q. What would happen when an employee wants to leave the business and what happens with the EOT when new staff join the business ?
A. If you leave the business, you leave the trust. For any new joiner, the business can decide when they become a beneficiary of the trust. One year is the maximum period that new joiner can be excluded from being a beneficiary. However, most businesses set it at somewhere between six months and the maximum of a year.

Q. What might the exit plan be in cases where less than 100% of the business is sold to EO?
A. Nowadays, most vendors want to achieve the 0% capital gain tax benefit and therefore will sell more than 50% in a single year in order to get that benefit.’