Construction business transitions to employee ownership in £24.5m deal

Prettys Solicitors, led by Daniel Billson (Corporate Services), has advised the shareholders of a long-established UK construction contractor on the sale of the entire issued share capital of the business to its employees through an employee ownership trust (EOT), in a transaction valued at around £24.5 million.

The business, based in the Eastern region, provides a wide range of construction services to national commercial clients and public sector bodies. The move to employee ownership was driven by the sellers’ desire to secure the long-term future of the business, preserve its culture and values, and reward employees for their contribution to the company’s success.

Bespoke EOT structure aligned to the business

A key factor in the success of this transaction was the careful design of a bespoke EOT framework that reflected how the business operates in practice, both at completion and beyond. In particular, the transaction documentation was tailored to support the relationship between the EOT and the trading company, while allowing the management team to continue running the business effectively.

Prettys advised the company throughout the transaction and prepared a comprehensive suite of legal documentation, working closely with Mobius Group (the EOT advisers) and Ensors (the company’s corporate finance advisers and accountants) to deliver a coordinated and efficient process.

Scope of Prettys’ work included:

• Designing and managing a nine-week timetable to completion, ensuring the transaction progressed smoothly and on schedule
• Working collaboratively with the EOT advisers and the company’s accountants to align legal, tax, regulatory and commercial considerations
• Establishing the EOT, including drafting the trust deed
• Incorporating the trustee company and preparing bespoke articles of association for the trustee company and each group company
• Drafting and negotiating the share sale agreement and all related ancillary documentation
• Preparing an operating agreement setting out a governance framework for the relationship between the EOT and the corporate group
• Completing all post-completion filings at Companies House and in respect of stamp duty
• Designing, adopting and implementing an EMI share option scheme following completion to incentivise and retain key members of the management team

Outcome

The transaction successfully delivered a smooth transition to employee ownership, providing the outgoing shareholders with a structured and tax-efficient exit while safeguarding the long-term independence and culture of the business. The inclusion of a tailored operating agreement and post-completion EMI incentives has created a clear governance framework and aligned the interests of the EOT, trustees and management team going forward.

This deal highlights Prettys’ strength in advising on tailored EOT transactions, particularly within the construction and engineering sectors, where continuity, governance and management incentivisation are critical to long-term success.

What they said

Dan Billson said “I was grateful to be entrusted by our client to assist it with such a significant milestone: its journey to employee ownership.  It was also great to work with Andrew Warner (Ensors) and Kingsley Tedder (Mobius Group) on this.  Both Andrew and Kingsley applied their significant experience in transactions of this nature to enable us all to work in a collaborative and efficient manner, and to deliver completion of the project in accordance with the client’s desired timescales.”

Kingsley Tedder of Mobius Group added “Advising clients on their transition to employee ownership is always a rewarding journey.  Working with other strong advisors in Dan Billson (Prettys) and Andrew Warner (Ensors) allowed me the time to spend with the client focussing on the key aspects of employee ownership safe in the knowledge that the other areas of the transaction were well in hand.  The client was extremely happy with the outcome and has already made great strides post transaction.”

Andrew Warner of Ensors said “It was a real pleasure to advise our client on the transition of their business into employee ownership. I got to know the owners well over the course of my time assisting them with this project and know how important its success meant to them – rewarding their employees and securing the future of a prosperous business that they had built together over many years. The transaction was completed in a smooth and timely manner, and this would not have been possible without the extensive knowledge and expertise of my fellow advisers, Dan Billson (Prettys) and Kingsley Tedder (Mobius Group).

Deal value: £24.5m
Sector: Construction
Lead partner: Daniel Billson (corporate)
Key team members: Sarah Lewis (corporate), Zoe Zhang (corporate), Sheilah Cummins (employment)