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Why choose an employee buyout?
Why an owner, or group of employees, might consider exploring an employee buyout.
Employee buyouts happen due to a variety of reasons. Business owners might consider an employee buyout rather than a trade sale or Management Buyout when considering their exit options. Employees of Companies looking to divest of a business or division might consider an employee buyout to ensure that their business can be saved and their jobs secured. The coalition government aspires to having a million public sector workers owning their own co-operative firms by 2015.
The 'UK co-operative economy 2011' report found that the number of employee owned and worker co-operative businesses grew by over 10% compared to the previous year. There are now over 570 employee owned and worker co-operative businesses with nearly 80,000 people as owners.
An employee buyout provides a number of benefits for both the existing owner and the employees who will take on the business:
- The legacy stays intact. The businesses name and place in the community is secured and not destroyed as might happen with a trade sale or closure.
- No adversarial party to negotiate with. Employees have a clear understanding of what they are buying and know the risks.
- The loyal employees who have helped to build the business remain in gainful employment and are now able to democratically control the business and its future.
- Employees, including management, who have helped to build the business, have an opportunity to share in future reward. The employee owners now have an absolute right to share in the success that their contribution achieves.
- The business can take long-term decisions about its future, rather than be forced to make short term decisions to make a quick return.
- No need to share the “books” with the competition. The outgoing owner doesn’t need to reveal commercially sensitive information to outsiders.
- Business owner has the option of retaining a role in the business if they wish and being a member
- Gains in employee motivation, morale and overall company performance.
Customers, suppliers and the local economy benefit from continuity rather than closure.