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An insight into the practicalities of an Employee Owned Trust (EOT)

It was my privilege to host our Deep Dive into EOTs last week where I was joined by Christian Wilson, Phil Waggett and my tax colleague Martin Brown.

Christian is a solicitor who clearly lives and breathes employee ownership. Phil is (or rather was) the part owner of a group of companies which recently transitioned into employee ownership.

Key points from the webinar

A full recording of the webinar can be found below, with some of the key takeaways summarised below:

1. From the horse’s mouth – Whilst Phil acknowledged it was early days for WFC Contractors under employee ownership, he was able to share some very useful insights into various aspects of the transition, including the decision-making process around making the transition and the practicalities of management post-transition. The latter in particular were picked out as being highlights for one of my (non-tax) colleagues who watched the webinar.

2. It’s definitely not all about the tax – There are compelling tax advantages for both the vendors and the employees of transitioning to an EOT. However, all participants agreed that tax cannot be the driver. Two of the reasons that may well trump tax are preserving a legacy and minimising the impact of the deal process on the company’s operations. Phil’s experience was that the nature of selling to an EOT meant relatively low disruption to ‘business as usual’, which he seemed grateful for.

3. Legacy impacts on deal structure – I was interested to learn how legacy has impacted on deal structures, particularly payment terms for and interest on deferred consideration, and bank funding (or more typically a lack thereof). The vendors’ desire to watch the business thrive post-transition to EOT sees them balance the requirement to get paid the value of the company in a timely manner against putting the company cash flow under pressure.

4. Evolution, not revolution – Once a company is sold to an EOT, it becomes the employees’ business. Whilst a sea change in the way the business looks and feels should not be expected immediately, clearly anyone who sells to an EOT wishes to see the business improve and thrive in the long term. Facilitating effective dialogue between the employees and the trustee board may be key to ensuring that the employees’ voice is heard.

Find our more about EOTs

I drafted a post with some background to EOTs which can be found here. You can also refer to our handbook: Employee Ownership: a guide to transitioning for more information.

If after (or even before) reading my blog and watching our webinar you’re interested to find out more about EOTs and how we can help with the evolution, please contact your usual point of contact at PKF Francis Clark.

FEATURING: Doug Oakman
Doug Oakman is a tax manager based in our Bristol office, specialising in management share incentives and employment related securities. He joined PKF Francis Clark… read more
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