After building up the specialist law firm he founded twenty years ago, Robert has recently transferred ownership to an EOT. Having spent two decades advising clients on employee ownership he can now proudly say he is leading by example.
We were curious to know what had motivated him to go down this route himself, how he found the process and whether he had any tips for others contemplating doing the same? Here’s what he had to say:
“For a long time, my focus was simply on working to grow the firm but as time went on I did start to think about what the future would look like, I think that’s a natural evolution. In particular, I started to contemplate what my succession solution would be as I got older. There were two parts to that – ownership and, separately, leadership, both need to be resolved when you are considering how and when to exit a business you have built. We may have found our ownership solution by becoming an EOT but we are still working on the leadership solution which is arguably more challenging.
Obviously, I’ve spent many years immersed in employee ownership so there was a compelling logic to go down a route I knew so well, it just started to look like the right thing to do. I can’t say there was one single reason that persuaded me, more a coming together of various factors. We have always had a genuinely supportive and collaborative working culture at Postlethwaite, we’re not a hierarchical place so an EOT seemed like a good fit and entirely in-line with our existing values.
My plans were put on ice because of Covid but once we started the process it took about 12 months to complete. We could have done it quicker, but we really wanted to take our time to make sure everyone at the firm knew and understood what was going on. My advice to anyone else doing this would be not to rush and to communicate really well with your staff about what is happening.
For us, becoming employee owned has been a really positive experience overall. It seems to have supercharged our collaborative culture, how team members have worked together since the change has exceeded my expectations and lightened my load a bit, everyone seems really invigorated and enthused by what we have done.
Because more people are now involved in making decisions at the firm, for example it’s not just me and co-directors deciding who to employ, things can take longer. The quid pro quo is that I think we are making better decisions as a result of more diverse input.
Our recruiters tell us that more candidates have expressed interest in joining us since we became an EOT – as a business, attracting the right people has always been a constraint on growth so we are really happy to hear this.
When it comes to clients, being an EOT ourselves is a real USP in pitches etc., we can talk from lived experience and we have had other law firms seeking us out to talk about whether EOT is right for them.
As much as I’m an enthusiastic advocate for EOTs I would never claim that it is right for everyone. Many people understand that there are generous tax advantages to doing it but the old adage, don’t let the tax tail wag the dog, still holds true!
Founder/owners need to carefully consider if it’s right for them and be realistic about whether they could make it work. When you have been used to being in charge and making all the decisions you have to be realistic about whether you will be able to change your behaviours if you’re planning to carry on in a leadership role. Once you put your business into an EOT you are no longer the owner, you are just another employee subject to all the same rules and regulations with no special treatment. “
Founded in 2003, Postlethwaite is a boutique legal practice specialising in employee ownership, with offices in London and Leeds it has one of the most experienced legal teams in the country for employee ownership transactions and is a specialist adviser to the Employee Ownership Association. The firm and it’s lawyers are top ranked in their area of expertise by Chambers & Partners and Legal 500.
If you’re exploring options for your own best exit strategy, it’s well worth considering an EOT. With its emphasis on tax efficiency, a flexible exit plan and a streamlined sales process, an EOT can establish a robust structure to safeguard both your business and its valuable employees for the long term. LegalEdge works with specialist EOT advisers such as Postlethwaite to guide and facilitate the transition towards employee ownership. We also work closely with Postlethwaite’s when clients are looking at creating and setting up an EMI option scheme.
If you’d like to learn more or discuss your specific options, please don’t hesitate to get in touch firstname.lastname@example.org