A community buyout sees the community buying a business from its present owner or owners. Find out how this works in practice
Types of community ownership
Direct ownership without shares
- The community become owners of the business but do not provide any investment via shares. The capital to buy the business in this case would be raised by a combination of grants and loans. The community enterprise runs the business directly.
Direct ownership via community share issue
- Members of the community become individual shareholders in the business through purchasing community shares. The community enterprise runs the business directly. Read more about community shares.
- The community takes over the asset, either through community shares or other forms finance, and holds it for community benefit, but does not run the business themselves. In many co-operatively owned pubs, the community does not directly run the business but leases out the operation to a licensee who is selected by the community.
Challenges and solutions
Communities engaged in acquisitions and buy-outs face all the same challenges as new-start initiatives, but often with the extra features of:
- Having to act quickly, especially if there is competition to buy the business or its principal assets
- Having to commit to development costs with the risk of substantial losses as there is no certainty that it will be successful in acquiring the business,
- The difficulty of agreeing a fair valuation for the business, especially when the principal assets are worth more as non-business assets.