PDT Corporate Team closes three disposals to EOTs within the space of one year

EOTs are becoming more widely accepted as a viable alternative to third party disposals and MBOs where business owners are looking to exit the business and recoup the value that they have built up over their ownership of the business. Read more here: Employee Ownership Trusts – Offering a genuine succession alternative.

Aside from the obvious tax advantages (sellers pay zero capital gains tax on a disposal to a qualifying EOT) many sellers are drawn to an EOT Disposal for a number of other reasons:

 

• Rewarding the loyal staff who have served them well over many years;
• Remaining involved in the business for a period of time and ensuring a smooth transition to the next level of management without the oversight of a third party buyer;
• Ensuring that the sellers get a fair valuation without a third party buyer looking to chip the price wherever possible; and
• The ease of the process, with no need to go through a marketing exercise or a due diligence exercise both of which can be time consuming and disruptive.

 

The fact that 2 years ago no one in the team had advised on an EOT and now in the last 12 months we have completed three of them is a clear indication of how popular they are becoming.

It is also interesting that the businesses were in quite varied sectors, with one business in Manufacturing, one in Construction and the third in Professional Services.

It is definitely not the right solution for everyone, and we have had some conversations where we have advised potential sellers against going down the EOT route but for anyone who is at the early stages of considering the disposal of their business, it should definitely be one of the options that they are contemplating.

If you would like to understand any more about EOTs and how they work please feel free to get in touch with the corporate team.