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5 Good reasons why you might sell your business to its employees

For most retiring business owners looking to sell their business, the simple plan and vision is to find a motivated complementary buyer, probably someone who knows your business sector so the hand over is quick and easy, a buyer who is also prepared to pay a fair price for the enterprise you have built up over the years, with the majority (or all) of the price payable at completion.

This is the expectation and target for most exiting business owners, the reality however is it does not always work like this. Many business exits do not work to the original plan, often the search for the right buyer proves harder and the sale takes longer to complete than originally hoped or expected.

Some will never find that perfect buyer.

Due to lack of preparation, time or other factors, a number of business owners end up selling to the wrong buyers. A typical example of this might be what we call a ‘Financial Buyer’ or ‘Zombie Buyer’, an acquirer with limited experience as a business owner with little or no financial resources who wants to pay you by instalments. These transactions are generally best avoided and keep the search going for the right buyer.

If you are keen to exit but not yet found the right trade buyer, perhaps you should think about selling to your employees via an Employee Ownership Trust rather than to a high risk stranger.

  1. Tax Free Business Sale All proceeds on the sale of your business via an Employee Ownership Trust (EOT) are tax-free under legislation introduced in the Finance Act 2014.

  2. Securing your exit Sometimes an owner may struggle to find the right buyer or can’t come to an agreement over the value and payment terms. Selling to your existing employees can provide exit certainty in the absence of a viable third-party acquirer.

  3. Protecting your legacy You may find the thought of selling to a competitor uncomfortable. Handing control to trusted managers who you have hired, trained and mentored over the years will give peace of mind and will help ensure the future business legacy.

  4. Looking after your staff You might worry about the impact on the staff by selling to the wrong acquirer. Selling to an EOT removes the requirement to ensure the potential buyer is a good ‘cultural fit’. An EOT provides reassurance of continuity while allowing for a managed exit for the founder.

  5. Speed of transaction and certainty Disruption and stress of a corporate or investor sale can have a significant impact. Retaining ownership within the company’s existing staff can reduce this substantially. Most EOT’s can be put in place within 3 months providing a high level of completion certainty for any retirement sale.

If you would like to find out more about selling to the employees or how we can combine your business exit programme to include both trade buyer and employee options, please email tony@vexus.co.uk

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