For most business owners, selling their firm is more than just a financial transaction. Many describe it as akin to saying goodbye to their child, and indeed, many entrepreneurs will have spent more time with their company than with their family. There are the customer and supplier relationships, the loyal employees and often a unique culture and way of doing business.
Yet, when the business owner seeks out the adviser for guidance on business exit, the most likely option presented will be a trade sale. Sell to the highest bidder, and sit back and enjoy the spoils. If this is the right answer, why do so many business owners regret taking this route.
At a workshop run by Telos Partners a few months back, we heard from an entrepreneur who had set up a successful recruitment business. He sold to one of the multinational players, and he remained as an employee. More accurately, he planned to. He left within the first month. He told the group that the culture changed almost immediately. The personalised service was ‘deskilled”, and quantitative rather than qualitative measures were used. The bespoke consultancy was becoming a CV factory. He told the group that he had his nice car, the cash in the bank, but wished there had been another way.
The irony is that there is another way. Employee ownership must be one of the best kept secrets of British business. By selling a business to employees, the business owner can manage their own exit from the business, to an extent shape the future of the company, and importantly, ensure that as long as the business remains viable, it can remain in the local area providing jobs, developing skills and retaining much of what made that business special.
Oxford academic, Will Davies, carried out a comparison of a business sold to private equity investors, and one sold to its employees. The report can be read here. The findings were conclusive. The private equity sale led to decline in quality, in customer relationships, and employee relations. The employee owned business, Gripple, continues to be innovative, profitable and productive. Employee ownership can lead to a sustainable, successful business. Selling to employees must become a serious consideration for owners looking to exit their business.