1 - St. Luke's
Description - The business started life as the London branch of an American advertising agency. When the office was threatened with closure in 1995, following a merger, the London principals suggested a buyout from the parent, which included all employees. The agency is one of the fastest growing in London winning a string of awards and has grown rapidly from a handful of employees to 130 co-owners with branches in Stockholm, Paris and India.
Description - The owner in his sixties wished to retire and decided to sell the stagnant business to the employees. Over the next three years the company was expanded by a growth orientated management and the number of employees increased from 29 to 60. The company won a design award. Sales were increased by 130% per annum over three years. After initial losses the company posted a profit in the third year.
Business description - Ever Ready make injection mould tools that are used in the manufacture of plastic products. It is very difficult to stand anywhere, look around, and not be able to count dozens of items made of moulded plastic. Every Ready provide:
Ever Ready specialise in very high quality of tooling for manufacturers who are interested in durability and longevity. Some of the tools that Ever Ready have supplied have been in use for very long periods of time, for instance, Rawlplug have used Ever Ready tools for 25 years and literally billions of pressings - a phenomenal length for a production component. They are one of the few suppliers who can work to this exacting standard. Every Ready was established in 1950 as Manor Engineering. The company became a wholly owned subsidiary of a multi-national corporation, McKecknie, in 1980.
Date of Deal - Changes in the global strategy of the larger group left Ever Ready with a less significant role and the central management decided that they no longer required their own facility but could rely upon out-sourcing. The owners decided to withdraw completely and thus redundancy notices were issued to all the Ever Ready employees in Autumn 1996.
Advice provided - The employees sought advice about their potential redundancy and through this came the idea of taking over the business. A small group of 2 or 3 employees took the lead. The advisers gave the employees the confidence they needed to decide to take over the business and practical support was given on:
Financials, etc - The conversion was financed by:
Ongoing role - The business is now relatively strong and the workers own it in full.
The company was formed by two founders in 1987 who decided to transfer ownership gradually to the staff from 1996.
Nature of Deal - The company's pre-tax profits were used to make significant contributions to the establishment of a Profit Sharing Trust. An Employee Benefit Trust was established alongside to buy shareholding over time from owners.
Employee Ownership structure - 30 of the employees contributed cash to the Trust, which enabled the Employee Benefit Trust to purchase the company shares.
Business adviser's role - Advice was provided to the founders on appropriate structure for achieving their objectives of gradually selling the business to the staff team. The new employee owners were given trustee and director training.
Financials, etc - The business had an annual turnover £1.5m with profits of over £100,000.
Key/Interesting Features - The structure used was very tax efficient from founders, companys and employees viewpoints. The company founders want as far as possible to pass free shares out to staff but some staff purchases will be allowed in future.
Date of Deal - The company formed by 250 redundant dock workers in 1992 who each invested £500
Nature of Deal - The company had traded profitability from formation, however, it was hit debt in 1995. The employees had to invest £40,000 by way of emergency loans to keep company afloat. Help was provided to restructure balance sheet by converting loans into share capital. The arrangement saved corporation tax of £10,000 over 5 years, and repayed the loans after 5 years.
Employee Ownership structure - 250 individual shareholders had put in £500 each. £40,000 loans were transferred from company to Employee Benefit Trust. A Profit Sharing Trust was established. Annual contributions were paid into the Profit Sharing Trust and then transferred to the Employee Benefit Trust to repay loans. After 3 years the Profit Sharing Trust shares were transferred free of charge to employees.
Business Advice - Advice was provided on the new legal structure, putting all documentation, etc in place, ensuring legality, etc with Inland Revenue.
Financials, etc - The business has 200 employees with an annual turnover £2m and is now making a small profit.
Key/Interesting Features - The company wanted to secure additional funding through Bank loan but it was not a bankable proposition. Restructured balance sheet does not raise extra cash but saves corporation tax and strengthens look of balance sheet.
Date of Deal - The company was formed in the early 1980s. The owners plan to transfer some shares to keep staff (and lock them in) had been under consideration for a number of years.
Nature of Deal - In 2001 four key staff decided to participate under Enterprise Management Incentive option scheme. Possibility of using it for succession planning purposes by using Employee Benefit Trust to buy out existing owner.
Employee Ownership structure - £100,000 shares were made available to four under Enterprise Management Incentive option scheme; staff must remain with company for 5 years before options can be exercised.
Business advice - Advising owner on structure and implications of various share schemes and / or using non-voting shares.
Financials, etc - The business has 60 employees with an annual turnover of over £3m.
Key/Interesting Features - Tax efficient for both companies and employees (use of EMI scheme). Free shares will be given out once 5 year option period has passed (no other conditions).