Employee Ownership Trust Transition Funded via MBO Finance
£1,450,000 · 7 years · 7.50% fixed. The founder of a successful manufacturing business with 85 employees wanted to transition ownership to an Employee Ownership Trust (EOT) - a government-supported structure offering significant tax advantages to the seller.
The Client
Founder of a successful manufacturing business with 85 employees
The Challenge
The founder of a successful manufacturing business with 85 employees wanted to transition ownership to an Employee Ownership Trust (EOT) - a government-supported structure offering significant tax advantages to the seller. The EOT needed to fund the purchase of the majority shareholding, which required external debt finance to complete the transaction.
Our Solution
Doulton arranged EOT transition finance, a specialist structure where the loan is repaid by the business over time from its profits, passing through the EOT. The founder received the majority of the purchase price on completion and the balance over three years. The tax-free nature of the gain for the founder was confirmed by the company's tax advisers.
The Outcome
EOT transition completed. Founder received a tax-free gain on the majority of proceeds. The 85 employees became beneficial owners of the business. In the first year, the business's employee engagement scores increased significantly and staff turnover fell from 18% to 6%. Key highlights: EOT transition finance structured - founder's tax-free gain; 85 employees became beneficial owners of the business; Staff turnover fell from 18% to 6% - employee ownership dividend.