Let’s get one thing clear from the outset – selling a business to an Employee Ownership Trust (EOT) is not the same as a management buyout.
I was recently chatting to a solicitor who has real expertise in EOTs and understands what issues are most important (note: these are issues around the cultural change required, not just the legal and tax aspects). He told me that of the businesses that he is working with, several of them have decided to handle the cultural change themselves.
This is rather like an American, with no experience of cricket, walking out to bat for England without first enquiring about the laws of the game.
Life in an EOT owned business is not like life in a privately owned business. How it is different it’s not something anyone can understand unless they have been through it.
Let me give a few examples.
1. The employees (beneficially) own the business. This will affect different people in different ways. As a general rule, the employees need to be given a voice within the business, in particular in company decisions. How will that be handled? How will the leadership team and board listen to employees? How will they provide feedback?
2. The employees are owners, but they do not own shares. Although they need to have a voice, they do not get to vote. How will the leadership team manage the expectations of employees who may see the sale to the EOT as their chance to finally get their way?
3. A different style of leadership. Being a leader in an EOT owned business is not just a case of stepping into the shoes of the departing boss. It means helping employees to think like business owners, to make the best decisions for the business. It is not a question of grabbing the power but realising that, in an EOT business, there is no power to grab. There are just decisions that need to be made at different levels.
4. Owners can get in the way. It will be the owner who decides that the business is to be sold to an EOT, and usually the owner who prepares the business. And yet, as the owner tries to encourage first the leadership team and then the employees as a whole to step up and take responsibility as owners, so they themselves need to create the space for this to happen. This is not always easy for either party, especially where the owner wishes to remain active in the business post sale.
5. The trustees hold the board to account. The trustees represent the employees. And the employees, presumably through a management structure, report to the board. This circular dynamic does not exist in privately owned businesses. How will this affect how decisions are made? What can you do to prepare everyone – directors, trustees, employees, leadership team – for this new way of working?
If you are going to go through a process which is alien to you, the best advice must surely be to get a guide who has been there before to help you find your way.
