Edinburgh businesses explain painless planned exits

Scottish Enterprise is hosting an event in Edinburgh on Wednesday 8 November designed to encourage business owners to consider their succession options.

Delivered by Co-operative Development Scotland (CDS), the arm of Scottish Enterprise that supports company growth through collaborative and employee ownership business models, the event will host presentations from the owners of Edinburgh-based employee-owned businesses Mike Stoane Lighting and Computer Application Services (CAS).

Taking place at Anderson Strathern’s office in Edinburgh, the event is part of a series of masterclasses from CDS on the topic.  The sessions are intended to cover the importance of succession planning with a review of the range of options available, including employee ownership.

IT company CAS took the route to employee ownership when a trade sale didn’t materialise.  The chief executive and chairman invested a proportion of shares with the remainder going to an employee trust or bought by individual employees.  The company has since sought external funding to enable growth plans and is thriving.

Mike Stoane wanted to exit his company in a way that meant minimal disruption to the great team he had built up.  He sold the majority of his shareholding in his lighting design and manufacturing firm, Mike Stoane Lighting, to an employee trust.  Majority trust ownership allows firms to pay bonuses exempt from income tax subject to certain conditions being met.

Bruce Farquhar from Anderson Strathern, who will be speaking at the event to talk through the succession options open to business owners, said:  “Business succession is often the elephant in the board room, however poor planning can leave a previously successful business very vulnerable.

“The traditional exit route of selling to a trade buyer isn’t universally attractive, especially to SME and family businesses.  A sale to a competitor can deliver a nice price to a seller, however for many owners of small businesses, the company value is more than its cash worth.  Many of these companies have a unique culture, strong supplier and customer relationships and a loyal, long service workforce. 

“There is another succession option coming to the fore in the Scottish business-place; a sale to the employees means that the people who know the company best are in control, relationships are maintained, and the business stays in the area.”

CDS’ research estimates approximately 16,000 employers in Scotland will be looking to transfer ownership in the next five years.

CDS director Sarah Deas said:  “Our overall aim is to support owners in developing their succession strategies. These events are a fantastic way for business owners who are considering an exit from their company to learn more about their options through expert advice and the first-hand experiences of others.”