How to achieve an employee buyout

If you want to retire, or to sell your business, you need to decide how to organise your exit from the business. Many business owners find that an employee buyout is an attractive option.

With an employee buyout, ownership of the business passes to the employees, either directly or through a trust. Unlike a management buyout, all the employees are involved.

Advantages of an employee buyout

• An employee buyout can be the best way of preserving the business and ensuring that employees retain their jobs.
• Completing the buyout helps ensure that the new owners of the business - the employees - are highly motivated. For many owners, safeguarding the future of the business and its employees is an important objective.
• An employee buyout can be a very effective way of organising your exit. It is usually less disruptive than alternatives, particularly as employees avoid the uncertainty of other kinds of sale.
• A buyout can also be completed without disclosing confidential information to competitors.
• Different financing options can allow the business to be sold for a fair price, even if the employees could not normally afford to buy it outright. Some business owners choose to sell their business to the employees for less than the full market value. See financing an employee buyout.
• There may also be tax advantages if the buyout is structured in the right way.