Employee Takeover or Staff Buyout
Full or Partial
Why the staff buyout option?
Inviting one or more current employees to buy into your business on a partial or full takeover basis is becoming an increasingly popular strategy amongst business owners. It can be an appealing alternative to passing ownership onto the next family generation, looking for an outside buyer, or simply winding down the operation for any number of reasons:
- You avoid the hassle and expense of locating an outside buyer
- The new owners or part owners are people you are familiar with – no nasty surprises
- The new owners or part owners are already familiar with the organisation and staff
- You have the option of retaining a share, or even a role, in the company
- There are tax benefits to be taken into consideration
Am I getting a fair price for my business?
This is a consideration that needs to be arbitrated between yourself and the employee(s) interested in becoming owners or part owners. It has been known to lead to acrimony and ill-feeling later on if dealings are not conducted in a fair and equable manner from the word go. The best advice we can offer here is to involve a neutral third-party advisor in negotiations right from the start to avoid any unnecessary accountancy and legal fees further down the track. Open and honest communication in all dealings is the name of the game here.
Will it be a full or only partial sell-out (ESOP or Employee Share Schemes)?
Get this absolutely clear in your head from before takeover negotiations begin. If you’ve had enough, your heart’s no longer in it, and you just want a return for all the hard yakker you’ve put in over the years, get out completely. Staying on in an advisory capacity to ensure a smooth transition is fine as long as both parties are happy with the arrangement, and the terms of the engagement are negotiated beforehand.
Staying on in some sort of permanent capacity is a much more involved and potentially problematic scenario. The new corporate structure and responsibility demarcation lines must be firmly drawn up before changes take place.
In both above scenarios, our advice is to take on a third-party arbitrator to oversee the transition and ensure all steps in the procedure are followed to the letter with integrity and transparency.
Is the business in the state stipulated in the takeover terms? Are the financial arrangements and legal requirements for the takeover firmly in place?
It goes without saying that, unless all predetermined arrangements and agreements are strictly adhered to, a company can expose itself to all sorts of legal and financial repercussions. Our highly experienced advisors are fully trained to identify and avoid any potential pitfalls in this area.
Are the new owners genuinely capable of taking on the business? How will the other staff react? Do I need to organise a confidential staff survey?
This consideration is all about the staff who are not involved in the company buy-out. Have they been kept in the loop? Do they fully comprehend what the change in ownership hierarchy means for them, their jobs, and their working conditions? What do they think about it? Will, for instance, their loyalty to you as a long-term, well-respected boss, result in a mass exodus when a new management structure appears?
Years of experience have taught us here at Business Support Studio that an invaluable tool in lobbying genuine staff opinion in these situations is a totally confidential staff survey conducted by an independent third-party such as one of our advisors. Remember, the longer-term success of a take-over is directly commensurate with the buy-in of the employees who are affected by it. An independent staff survey is the first step in nipping potential personality clashes and perceived feelings of betrayal in the bud. The very last thing a company needs is employee disgruntlement and ill-feeling at a time of transition. Our advisors will conduct, analyse, and report on a staff survey, and then assist in remedial action if required.
Customer surveys are as powerful a tool as client surveys. Again, our advisors can conduct them on your behalf by lobbying your customer base for how (if at all) the management change has impacted service levels, and consult on any necessary remedial action.
We work with a select team of highly experienced Business Advisors, all of whom have strong, pan-industry expertise in all aspects of business exit strategies.
If you get in touch with us, we will match you up with the most appropriate advisor for your industry and situation. What’s more, you can check them out in a no-cost/no-obligation initial meeting before you commit to any ongoing relationship – an ideal scenario if, for now, all you want to do is kick around a few ideas with an expert.
So if you think you may need a hand with selling your business to your employees, please contact us here at Business Support Studio. It doesn’t have to be today. It doesn’t have to be tomorrow. Just visit our website and we’ll get in touch with you when you tell us you’ll be ready.
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7/59 Paul Matthews Road
09 930 8463