PA Jewellery – 12 months into Employee Ownership

The number of employee-owned businesses has increased significantly in recent years and awareness has jumped following high-profile transitions to employee ownership such as Richer Sounds.

Employee Ownership is where the whole or part of a Company is owned by, or on behalf of, its employees. The government introduced some new and relatively generous tax reliefs for employee-owned companies in 2014 and since then Employee Ownership Trusts (“EOT”) have become an increasingly popular exit route for owners of trading companies. A business owner choosing to sell a controlling interest to an EOT may be eligible for exemption from capital gains tax.

In 2018, the Hawsons Corporate Finance team had the pleasure of supporting P.A. Jewellery Limited, a well-known retail business in Sheffield, in their transition to Employee Ownership. The founding family were keen to find a suitable succession strategy, whilst providing a secure future for the company and their employees. Hawsons were able to provide a solution that was both tax efficient and gave the workforce an opportunity to participate in and benefit from ownership of the company they work for.

12 months later, Hawsons caught up with P.A. Jewellery’s Managing Director Ian Cookson to get his thoughts on the company’s journey so far. Below is what he had to say.

Q Had you heard of EOT’s or employee-owned businesses before you were involved in the transaction?

A I was vaguely aware of employee ownership; one of our gemstone suppliers is employee owned though it is through direct bequeathed shareholding and there is also a well-known independent retailer in our industry that operated as an employee owned co-operative. However, I hadn’t heard of employee ownership trusts and had no idea of how well employee ownership could work for both the shareholding family as the outgoing owners and for the employees.

Q Did you have any preconceptions about a what a move to employee-ownership would involve/mean?

A Until it was introduced as an option by Hawsons I had never had cause to think about employee ownership so didn’t have too many preconceptions. I would’ve wrongly expected it to have involved substantial personal investment from the employees or a large altruistic gesture from the shareholding family.

Q How did the employees react to the news?

A They were genuinely surprised and excited at the idea. As an employee being able to have an active role in steering the company you work for and directly benefiting from its future success is an unusual thing and it made everyone optimistic for the future after a period of uncertainty following the passing of founder Mike Marsh.

Q Were there any issues/challenges that you were faced with following the transition?

A The main challenges have been administrative and ensuring that everything is done according to “the rule book” to allow us to enjoy the tax benefits of employee ownership. Hawsons have continued to support us through this so it hasn’t been an issue. Otherwise it has largely been business as usual.

Q Are you happy with the outcome that has been achieved by the move to Employee Ownership?

A Absolutely.

Q Do you have any advice for those considering the move to Employee Ownership?

A Do it! If possible, start the process earlier rather than later, this will make for a smoother transition and can avoid the need to seek outside financing along with the associated costs.

Q Has the transition allowed the company to continue the ‘work family’ atmosphere that the Marsh family were keen to instil throughout their ownership?

A It’s definitely built on the family atmosphere that was already present. When asked if we’re a family business the immediate answer is yes, just without any blood connection.

Q Have there been any effects on the performance of the company following the transition?

A After only 12 months it’s difficult to say as we have always see peaks and troughs in the business, however we have seen a small increase in turnover in the last year in a climate where many retailers are struggling. We have a very hard-working team anyway, but since the transition everybody seems to have found a bit of extra motivation which is sure to have contributed to our good year.

Q Would you recommend other companies to transition to Employee Ownership?

A Certainly. For any company with a strong team and no obvious family succession it’s a fabulous option to consider. In fact, I have already been recommending it to our customers who have taken an interest in our change of ownership and also spoke about employee ownership trusts at a National Association of Jewellers conference on succession planning where half a dozen other jewellers spoke to me afterwards looking for further information.

Hawsons Corporate Finance are highly experienced and qualified to advise on whether an EOT transaction makes sense for you and your business. We can advise on and project manage the whole process from tax advice, valuation of the business, sourcing funders, through to legal completion of the sale. For more information on EOT’s and to gain an understanding of whether it is the right succession plan for you please visit our website or contact us for a free, no obligation meeting.

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To find out more about how one of the leading firms of accountants in Sheffield, Doncaster and Northampton can help you, please contact one of our specialists. We believe in long-term client relationships and understand the importance of meeting to establish that you like us. This is why we offer all new clients a free initial meeting which will enable you to have a discussion about you and your business issues.

 

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Pete Wilmer

Pete Wilmer

Corporate Finance Partner

0114 266 7141

[email protected]

Jack Ware

Corporate Finance Manager

0114 266 7141

[email protected]