Selling to a third party isn’t the only exit route for business owners. Traditional Management Buy Outs (MBO) or Employee Ownership Trusts (EOT) provide popular alternatives, also rewarding the employees who have helped grow the business.
Whatever the ambitions in succession, we work with business owners to understand the options.
There are essentially three types of employee ownership succession:
1. Individual
Employees, generally a smaller number, hold the shares in their own names. This is akin to a traditional MBO, with the tax position for the sellers similar to a third-party sale.
2. Trust
An EOT is formed to hold shares on behalf of employees, generally a larger number. Sellers’ tax position is enhanced and they can receive value tax-free.
3. Hybrid
An EOT owns the majority of shares, but senior management also hold equity individually (e.g. via a share option, or growth share, scheme).
In all three cases, a majority interest in the business passes, but sellers can retain a minority holding. MBOs generally provide the simplest transition and greatest flexibility, but EOTs can provide great solutions with enhanced benefits. Whilst more complex, a tailored hybrid model can preserve the best of both.
To discuss any of the above in the context of your business, please get in touch with us.
The Team
Our experienced and approachable team are on-hand to assist you, please get in touch below:
