Case study

Securing an exit for sellers after an abortive sale process failed to meet required metrics

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Advising the sellers of an engineering and project management services business on an exit to an EOT after a market sale process did not meet the requirements of all of the owners and additionally allowed a transition of the business to employee ownership.

What was the problem?

  • We were engaged by the owners of an engineering and project management services business who were contemplating selling the business to a third party buyer after a market sale process. One of the owner managers wanted to remain working full time and was very concerned that having not worked for anyone else in his life, the changes brought about by selling the business to either an investor or trade could change the way the business would operate in the future. There was very little transaction value difference between the two options with both options having deferred payment risk. However on the employee ownership route the sellers felt it would be ‘business as normal’ with minimal disruption, they were more in control with staff they knew and trusted, the conditions for payment targets were lighter and the sellers could also be more flexible on when the employee ownership trust was able to pay deferred payments going forward.
  • The sellers’ corporate finance, tax and legal advisors provided an assessment of the financial, commercial, legal and tax benefits of selling to the employee ownership trust versus a trade sale.
  • The sellers were delighted with the outcome this represented for them, with the added benefit of no taxation onpayments received and also enabled them to benefit their long standing employees in transferring business ownership to them.

How did we help?

Gateley provided the legal advice to the sellers, set up the employee ownership trust, arranged the tax advice and HMRC clearances, prepared and completed all the required legal documents.

Mr Jones, Client said: "The concept of EOT was not familiar to us, and although we had heard of it before, we had not linked this option as an opportunity to us until this was brought as an alternative business exit strategy to us by our corporate finance advisors KBS Corporate. We engaged Gateley to carry out the legal documentation, advice and guide us on tax aspects and also gain the HMRC clearance which was required before the EOT process could be progressed. We had requested a very tight time schedule of Gateley to complete this transaction, and this was achieved efficiently, through excellent communication, continued and measured progress against a time line, and most important to us was hassle free."

Achieving the best outcome for our client

The sellers sold their business to their employees effectively, giving the sellers flexibility with differing degrees of continued involvement, very little business and employee disruption, lighter deferred payment targets and greater flexibility in payments and with the additional benefit of not having to pay any capital gains tax or income tax on the proceeds of sale. 

How can we help you to use EOTs effectively?

We advise business owners on how to use employee ownership trusts effectively to achieve a variety of outcomes from exit and succession planning to employee engagement. For further guidance please contact our experts listed below or visit our employee ownership trusts service page for more information on how we can help you.

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