2020 was a bumper year for Employee Ownership Trusts
In spite of the challenges of the pandemic, 2020 was a bumper year for new Employee Ownership Trusts (EOTs), according to flash results of the EOT Survey, maintained by RM2 for the Employee Ownership Association.
There were 104 new EOTs established in 2020, just one short of the 105 in 2019, which itself was a record year. This brings the total number of extant EOTs to 421. A further 14 have been sold or dissolved over the years since being established, and that number may increase in 2021 as the delayed economic impact of lockdowns starts to bite.
This is almost certainly an under-estimate of the total number of EOTs. Many companies choose not to publicise their transaction, and EOTs are not always discernible from public sources like Companies House. “Taking into account the known unknowns, I think there are now at least 500 EOTs in existence in the UK” said Nigel Mason, director of corporate finance at RM2.
The above numbers are provisional and subject to change as more data trickles in. We will publish a more comprehensive analysis in the Spring.
There are several reasons why EOTs continued to be attractive as an exit route for business owners in 2020. Trade buyers have largely withdrawn from the field. EOTs can be arranged quietly and efficiently with a high chance of completion. EOT deals can be structured to give fair value to the selling shareholders whilst also protecting the company from excessive claims on cashflow. And there is no doubt that rumours about changes to Capital Gains Tax rates also played a part, as sales to EOT are still tax free.
For a quick summary of the EOT download our free factsheet