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Reaching agreement between the seller of the business and its new employee owners is one of the more difficult areas. Sellers frequently find that they must reduce the expectation of value for the business and future employee owners need to raise theirs. The sale of the business by an owner to its employees may however provide a better return for an owner than open market sale to a competitor who may value the business lower than the owner's expectations. The owner will also bear costs of marketing the business and also face the risk of a competitor gaining knowledge of the business during due diligence but then not proceeding with the purchase. The sale of a business to employees may reduce that risk and cost.
Employee owners may raise funds to purchase the business from their own resources; from borrowing secured on the business; or sometimes by agreeing with the owner payment of the sale proceeds over three to five years. An owner of a business may obtain tax relief by giving shares to an EBT.
It remains the case that many owners omit to consider the possibility of a sale to employees as part of any succession strategy, often leaving it to a matter of last resort or where the business is facing liquidation and there is no viable alternative. Many owners will fear that informing staff of their wish to sell will have a detrimental effect on future business. However there are now legal obligations on an employer to inform and consult with employees and financial penalties for failure, which may help to shift this perception. Employee succession benefits from being considered as part of a long term strategy where issues such as ethos and working environment can be structured to assist in making employee ownership a success.