How to achieve an employee buyout

White Ink Architects is a RIBA Chartered Architectural practice. Founded in October 2001 by Sean Tunney, Claude Maguire and Joan McCoy, the company initially called Maguire Tunney McCoy was renamed White Ink Architects in 2003.

White Ink Architects started as a partnership, converted to a limited company in 2005 and became employee-owned in 2021.

Joan explains why they decided to become an employee-owned company and the process that they went through.

Consider your options

“Before employee ownership, the business was managed by the three directors who were also equal shareholders, owning 100 per cent of the shares between them.

“We wanted to find a way of securing the future practice in addition to its culture and the prospects of everyone who has worked so hard to make it successful. Options considered included employee buy-out and sale - however, the advantages of employee ownership through the trust model made it a clear choice for us.

“The Employee Ownership Trust (EOT) model means that effectively ‘money is off the table’ - this means that employees in future will not have to find excessive sums of money to fund the purchase of shares.

“It was important to us, having set up the practice with nothing, that we could secure its future through talent. The future directors will be determined by leadership skills and talent, not by the ability to access funds to buy the owners out.

“The EOT model also allows us to retain the ethos and culture of the practice – something not guaranteed with an external sale, where a buyer might introduce a different culture or seek to take the business in a direction not supported by the employees.

“There are also tax advantages for sellers and for bonus payments to future employee owners (within tightly constrained rules) as part of the structure laid out by the government to encourage this model of succession.”

Steps to achieve employee ownership

“After we researched the options for succession, we received guidance from a specialist co-ownership consultant and companies who had successfully transitioned to employee ownership to help understand the tax, legal and operational issues.

"Not only did our consultant handle all of the paperwork and legal aspects, but they guided us through the employee engagement process and employee-owner training for a successful outcome.

“We obtained an independent valuation of the business, and our business plan assessed that the company was in good financial health to meet future shareholder payment obligations. We also obtained tax clearance for the proposal from HM Revenue & Customs.

"We contacted the Employee Ownership Association and gained insight into the approaches of other companies running as an employee-owned businesses.

“We then consulted with our employees and obtained feedback. We explained the rationale and how it would work. With the obvious benefits for everyone, it was well-received. We followed up with a guidance document on employee ownership and training sessions on the responsibilities and rights of employee-owners.

“The transition process to employee ownership took six to seven months.”

Measure success and plan for the future

“The biggest challenge for the shareholders was the shift of mindset – moving on from the idea that White Ink would no longer be ‘ours'. I think the key to the success of this process is to be confident in advance of the transition that it is the right decision, both personally and also for the business.

“Our employees now have a real stake in the success of their practice. We hope that they will benefit from the financial rewards of this long term plus enjoy the immediate benefits of increased engagement, knowledge, and consultation regarding the management of the practice and its future direction.

“The practice is now being run for the benefit of employees for the long term. The company directors are accountable to the employees via the Trustees of the employee ownership, which includes a staff member in the role of Staff Trustee. This elected position provides a voice to the staff at the highest level.

“In due course, we also hope to make a first ‘Tax-free’ bonus to the employees - one immediate tangible benefit to the employees.

“The move to employee ownership, whilst a big step, is only the start of the process. Figuring out what it means for White Ink moving forward will be a process that has many iterations over the future lifespan of the company.

"Knowing that White Ink will continue as long as we have a group of employees working together for mutual success is a very satisfying achievement."