A slow down on EOT transactions – not that we have noticed.

A recent article in the Times reported a slow down in Employee Ownership Trust (EOT) transactions in the last year.

In comparison to 2024, when some 550 companies transitioned to EOT ownership, reports suggest that there may be as few as 350 this year.

At RM2, we aren’t necessarily seeing a significant drop in interest in EOT transitions, but we think there are a number of reasons for the numbers reported.  In particular, it’s possible that there was a spike in 2024 arising out of companies completing their transactions before the budget in October, which introduced a number of changes to the legislation.

This year, while we’re not anticipating anything specific on EOTs to come out of the budget, some business owners are exercising a little caution, and adopting a “wait and see” attitude.  So we may see an uplift in numbers in any event after the budget (unless Ms Reeves surprises us all – which we’re hoping won’t be the case!)

Where we are seeing a change is in the type of business owners considering EOTs as an exit route.  Some of the budget updates last year – in particular, the extension of the period during which sellers’ CGT benefits could be clawed back, and the requirement that EOT trusts must be located onshore – made EOTs less attractive for owners focusing heavily on the tax benefits.  RM2 welcomed these changes – in our view they are unlikely to diminish interest from business owners with a genuine commitment to transferring ownership to employees.

We continue to see significant interest from owners seeking an alternative to traditional exit routes on retirement that maintain company culture, protect and reward their employees, and create  long term sustainability for long-standing family owned businesses.  It may be worth remembering research on business succession produced by the EOA a couple of years ago which noted that over two thirds of older owners of SMEs intend to sell in the next ten years.  For those owners, the EOT continues to be an excellent alternative to selling or even closing the business entirely.

We look forward to seeing what happens after the budget.