In owner-managed businesses, succession planning is often delayed until retirement approaches. Effective succession can involve passing the business to the next generation, selling to the existing management team (MBO or VIMBO), or transitioning to employee ownership (EOT). Early planning is essential for a tax-efficient exit and to prevent last-minute disruptions. We can help you create and implement a customised, tax-effective exit strategy.

Management Buy-Outs (MBOs)

An MBO involves the existing management team purchasing the company’s shares from the current shareholders, gaining full control to drive the company forward and realise its value. MBOs entail legal, funding, and valuation considerations and can be a favourable option for vendors in various situations.

Vendor-initiated management Buy-Outs (VIMBOs)

In a VIMBO, the business owner offers the management team the chance to buy the business. This can be preferable to a third-party sale as it keeps the business within a trusted team. Financing a VIMBO may include an initial payment, a bank loan, or a Vendor Loan Note, with deferred payments from future profits. Owners might retain a minority stake or take a consultancy role post-buy-out.

Employee Ownership Trusts (EOTs)

EOTs, where employees own most or all of the company’s shares, are increasingly popular for succession. This model retains company independence, rewards employees, and ensures fair value for outgoing shareholders. Established by the government in 2014, EOTs offer significant tax advantages. To qualify, an EOT must:

Meeting these criteria allows vendors to transfer control to an EOT, gaining Capital Gains Tax relief, which can significantly enhance the effective value of the sale.

Further information on Employee Ownership can be found here.