Transitioning to an Employee Ownership Trust: The Grapevine Story
Grapevine are a full-service IT and communications support provider. Brian Vockins was one of the key owners and sought an alternative to a business sale as his exit strategy. He wanted to leave a good legacy and an Employee Ownership Trust was his choice. Brian shares his story and his reasons for choosing to become an EOT.
How did you first ‘discover’ James?
I watched two webinar recordings that James Shand, from vfdnet, did with Val King about the financial aspects of an EOT deal. I reached out to him, and we had a chat.
Why were you planning an EOT for Grapevine?
There’s a lot of mergers and acquisitions within telecoms and IT world. I didn’t want Grapevine to be gobbled up by a bigger group, and just lose our identity. Plus, we have such a brilliant and committed team I wanted to retain. Furthermore, our MD, was ready to lead the new structure.
How did you work with James?
It started with a valuation piece of work in January, but it became clear we needed someone to project manage and help us to choose the right EO lawyer. With trust having been built and James’ experience of managing EOT deals he was the clear choice.
What did the process entail?
With the new budget looming I was keen to get this EOT over the line before Budget Day on 15th March. The upcoming Budget created uncertainty as to whether there would be any change to Capital Gains tax.
This was a very tight turnaround – 8 weeks! I’m told typical EOT deals take 6-9 months, often longer. Would we be able do it?
Were there any complications?
This was not what you might call a plain ‘vanilla’ EOT deal. It had a particular complication that James spotted but created a solution and contained our costs.
James project managed the briefing to his two chosen EO lawyers, ensuring they all quoted like for like. He then presented the proposals back to me with his suggestion, but it was up to me to make the final selection. Of course, I went with James’ suggestion, it would be mad not to!
James was able to wrap the complication into the EOT legal brief presented to two specialist EO lawyers. Our final choice (as recommended by James) meant both our timeframe and our budget were protected. Having James manage the whole process was a big weight off my mind.
How did you manage everyone’s interests in the EOT deal?
James took us through his Grand Bargain methodology to ensure that every stakeholder’s financial needs were considered in the design of the EOT.
It’s not just the people whose interests need protecting, it’s the business interests too!
The Grand Bargain takes into account all stakeholders views including:
- Employees
- Business Owner
- Senior Leadership Team
- Business
- Shareholders
James’ Grand Bargain looks at profit share to employees, repayment time to sellers, future forecast, working capital, cash flow implications and profitability projections. It takes into account the needs of the business in terms of capital investment planned for the future. The Grand Bargain then summarises all the contractual obligations, enabling the EO lawyer to bring these aspects into the legal documentation.
Who managed the relationship with the lawyer?
James! He was the linchpin between me/Grapevine and our lawyer. Our EO lawyer commented that very often he has had to wait weeks or even months for business owners to work out the amounts and timings of consideration payments, whereas the Grand Bargain methodology efficiently generated all this. James worked very well with our EO lawyer, identifying matters which might derail the deal, so helping to project manage the deal, getting it done on time and on budget. This made the whole legal process so efficient and of course saves hours, days in fact, of going back and forth with the lawyer.
I was impressed with how James managed our costs and the relationship with the specialist EO lawyer. I’m sure this and the Grand Bargain was a big factor in supporting our tight deadline.
Over the finish line
The fastest EOT ever done I imagine – the project team did it! We completed on the 10th March! Budget Day on the 15th.
Brian’s Final EOT Reflections
Grapevine has been my life for the last 30 years and I am proud of what we have achieved I wasn’t prepared for that to be lost. An EOT was the answer.
I wanted a deal that was fair to all and provided for me and my wife, and fellow shareholders, while completing before Budget Day.
James was amazing, he led the whole team and we did the deal in record time. Thank you, James, we couldn’t have done it without you!
I recommend both James and an EOT deal to any business owner wishing to sell their business to their employees. An EOT enables the owner to leave their business legacy and values to live on and thrive for years to come – something everyone can be proud of and benefit from!
If you’re considering an EOT as your exit strategy, book time into James Shand’s diary for a non-obligatory chat.