Funding Business Succession solutions through Employee Ownership

baxi partnership can impact on key issues with expertise & experience

There are some key issues which need to be addressed at the outset of any co-ownership buyout.

A feasibility report will make an initial assessment of seller and buyer intentions, the company valuation, the market environment, current and future profitability, strengths and weaknesses and potentially difficult to resolve issues.
Detailed business planning will be undertaken including an appropriate management and legal structure, detailed financial forecasts and an assessment of capital required to facilitate the process and future business success.
Raising necessary capital and identifying suitable sources of funding is critical in producing the correct amount of finance necessary, without overburdening the company with debt thus endangering future prosperity.

Baxi Partnership has a team of experienced individuals who all have specific expertise – gained through first hand involvement with some of the leading employee owned organisations across the UK. – to reach successful conclusions in each of these areas.

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When Nick Boyle started his home care service in Inverness in 1994, he was driven by the desire to offer people choices at a time in their lives when they are at their most vulnerable.

Highland Home Carers provides care for people in their own homes. Carers employed by Highland Home Carers do a very rewarding job, and often a difficult and demanding one. They pride themselves on delivering the highest standards of care.

When it came time to sell the business, Nick recalls

Selling out to a national nursing agency was not a consideration for me. The employees and service users deserve better. Employees in this company exert a real influence in the direction and performance of their business, and share in the rewards generated. The service users appreciate that they are dealing with people who own a stake in the business.

Highland Home Carers is recognised as the leading home care provider in the highlands, and has been recognised with several awards. Employee retention and satisfaction levels are high. The company has ambitious plans for expansion, exploring a number of new initiatives.

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When it is time for business owners to sell all or part of their business, either because they want to retire or to move on and do something different there are several choices such as Family succession; a Trade sale; Liquidating the assets; Management Buy Out; or Sell to Employees.

Each has it's own issues, for instance, there may not be a willing family member to take on the business.

A trade sale can mean that the character of the business disappears... what makes the company a good place to work - and a great business to deal with - will change. Independence will be lost.
In a sale of the assets there is a strong likelihood of receiving no payment whatsoever for all the goodwill that has been generated (reputation and customer loyalty) and this approach is likely to yield the lowest return.
A management buy-out can put undue and distracting pressure on the organisation's key people, and often results in the negative effects of a trade sale further down the line.

The option to sell to the employees is not one which most owners think about but it can be a tax efficient route for transfer, maximising the value of the business, and safeguarding jobs. A sale to employees means a transfer to a group of people who have a vested interest in consolidating and expanding the business they have helped build up over many years.

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Parfetts Cash and Carry was a family owned business which always has been proud about its independence, caring for employees and customers. With six depots, a number of retail units, and almost 600 employees, it was an attractive target for key industry players.

Steve Parfett, Managing Director, had spent his early career at Waitrose, part of the John Lewis Partnership

When it became evident that the next generation had no real wish to go into the family business, then succession became an issue. I had always been attracted to the John Lewis model, but had no idea how it could work for us.

We wanted to preserve the uniqueness of Parfetts. We have been successful because we work closely with our employees, our customers and our suppliers. Our fear was that this would all be lost if we sold out to a competitor.

For us, employee ownership was the best alternative to continuing as a family business.

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to be successful, employee ownership needs to be sustainable

Working with you we can help ensure smooth implementation of the business transfer process offering project management, change management, design of communication strategies and ongoing support to ensure that the owners' aspirations, the company's organisational culture and business processes deliver sustainable business success.

To achieve this we provide a range of services such as:

Suitability Assessment – to ensure employee ownership is right for you
Business Transfer Support – to ensure smooth implementation
Ownership Structures – helping shape the future organisation
Toolkit Provision – with a range of tailored products
Cultural Development – using sophisticated diagnostics
Training – with a programme of open and closed courses

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G3 Baxi Partnership was the first start-up business funded and supported by Baxi Partnership Ltd. Unlike the previous transitions to Employee Ownership, the individuals involved at G3 were employed elsewhere, and saw an opportunity to take their destiny into their own hands. Over a long period of time, they talked & reflected on what employee ownership would mean for them, and the detail of their vision became clearer in what it was that they wanted for themselves and their future colleagues.

Says Mike Goodman, Managing Director:

We are different because we are wholly employee owned and hence truly independent. Employee ownership prepares the company to live in perpetuity. All employees become shareholders of the company.

The majority of shares, however, are held in the Employee Benefit Trust which prevents the company from being sold or operated for the benefit of a few.

This puts us in a unique position within the oil and gas industry. Our time horizon is long, our relationships in the business are planned to be enduring, and our focus is to help our clients solve the technical challenges involved in producing, transporting and processing the oil and gas required to support the world’s economy

Our employees work in a company which sees its future as being independent and successful for the long term.

The people at G3 Baxi Partnership were so delighted with the process and transition that they incorporated Baxi Partnership into the company name.

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why trusts are often an integral part of employee ownership structures?

Employees can own a business in various ways, either directly or indirectly.

The choice is often determined by the size of the business and the number of employees. For example, a relatively small buyout might choose a co-operative model with an Industrial and Provident Society or a share company structure.

Another common method is to set up an employee trust that holds shares on behalf of the employees. This can be a very flexible solution. The trust might hold the shares forever, or distribute them to individual employees, or a combination of the two. It can buy shares back from employees who want to sell (for example, when they retire).

Putting shares into an employee trust can have tax advantages if the deal is structured in the right way. Using a trust may also be a good way of raising bank finance to acquire the shares.

Trusts play two vital roles in making employee ownership possible and stable. They're an efficient vehicle for buying and 'warehousing' the shares being bought out; while shares permanently held in trust can't be bought and sold, hence don't need to be financed again, and so become an extra guarantee that ownership is secure.

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How effective is your Employee Stock Ownership Plan?

To get the maximum return from your ownership structure, you have to know what’s going on in the workforce’s minds.

What does ownership mean for them?
How well do they understand what it’s all about?
What do they value about working in their company?

Baxendale, the people division of Baxi Partnership, has joined forces with the National Center for Employee Ownership in the U.S. to enable us to offer the only U.K. Employee Survey specific to Employee Ownership.

The outcome is detailed analysis which measures employee attitudes, perceptions & understanding

This is a validated and reliable tool which quantifies people’s understanding of their ownership structure and provides valuable information on how they view their working environment.

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We are highly indebted to Baxi Partnership for their tremendous support in helping us, not only to fully embrace the culture of employee ownership, but also for their ability and desire to help provide business solutions which are appropriate and timely in our journey towards becoming a World Class Organisation.

Throughout their involvement, we have been hugely impressed with their knowledge, commitment and enthusiasm and I have absolutely no doubt that the two organisations will work closely together over many years to come.

Paul Cooper, Chief Executive. Home Insulation Services.

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EVENTS

baxi partnership can impact on key issues with expertise & experience

to be successful, employee ownership needs to be sustainable

why trusts are often an integral part of employee ownership structures?

How effective is your Employee Stock Ownership Plan?