Bringing the best of US to UK employee ownership

Posted by Jennifer at 14:18 on 23 Mar 2016


It gives us great please to introduce RM2 Corporate Finance Ltd, the newly established corporate finance affiliate of The RM2 Partnership Ltd. As many of you may already be aware, The RM2 Partnership is the leader in private company UK share scheme administration. As a result of recent tax law changes in the UK, there are now significant benefits available to both vendors selling to an Employee Ownership Trust (“EOT”) and their employees. Consequently, a sale to an EOT has become a compelling alternative to a sale to a strategic buyer or private equity firm. RM2 Corporate Finance focuses on the structuring and raising of capital to support change of control EOT transactions so that vendors get a fair value and a path to liquidity.

Garry Karch, Managing Partner and experienced Employee Ownership investment banking and corporate finance professional from the United States, has co-founded RM2 Corporate Finance and will lead bringing our corporate finance solution to business owners throughout the UK. Garry brings over 25 years of Employee Ownership investment banking and corporate finance experience to RM2 Corporate Finance, most recently at Butcher Joseph & Co., perhaps the leading ESOP-focused investment banking firm in the US. Throughout his career, he has advised companies entering into employee ownership transactions and both provided and sourced the financing required to successfully implement the transition to employee ownership in whole or in part.

Two of the key considerations for business owners contemplating a sale of their company have always been valuation, what their company is worth, and liquidity, the proceeds actually received by the owner at closing. While valuation is certainly an important factor in any sale transaction, we would submit that equally as important is what the business owner actually receives from the sale at closing. Additionally, the potential proceeds received over the full transition period are an important factor in any decision. A sale to an EOT, given the recent tax law changes, is now much more competitive with more traditional sale alternatives. Using third party external financing to facilitate the sale to an EOT, combined with the capital gains tax elimination when greater than 50% of the business is sold to an EOT have made this alternative more compelling. The ability to structure a vendor note that potentially provides both current income and equity upside should also help make the sale to an EOT an option worth considering by business owners exploring succession.

Further instalments of our RM2 Corporate Finance blogs will delve a little deeper into what a change of control transaction could look like using third party financing.

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