FINANCE
Gap in succession planning among UK businesses
THE RECENT AZETS BAROMETER SURVEY , WHICH GATHERED FEEDBACK FROM BUSINESSES ACROSS THE UK , IRELAND AND THE NORDIC COUNTRIES , HAS REVEALED THAT FEWER THAN ONE IN 10 UK BUSINESSES HAVE SUCCESSION PLANNING FULLY INTEGRATED INTO THEIR STRATEGY , DESPITE 30 % OF COMPANIES DEMONSTRATING A WIDESPREAD RECOGNITION OF ITS IMPORTANCE .
BY KATIE HODSON , PARTNER AT AZETS , katie . hodson @ azets . co . uk
The research also showed that more than half ( 58 %) of businesses have considered succession in their strategic planning , with almost a third ( 30 %) scoring 8 or above out of 10 when asked how much thought their organisation is giving to succession planning ( 0 = no thought at all ; 10 = fully integrated ).
However , just 9 % of businesses have succession plans fully integrated , while 6 % have given it no thought at all .
Succession should be high up on the agenda of every business owner , particularly in the current economic climate . Meticulous planning that is fully embedded into your business strategy ensures future proofing and strategic continuity . It ’ s imperative that business owners think about their options and take control of their exit route , before it becomes forced .
Having a succession plan built into the business strategy ensures you are prepared to realise the business ’ s full potential and maximise shareholder value .
Some of the available options , but not an exhaustive list , include :
• Enterprise Management Incentives ( EMIs )
• Management Buyouts ( MBOs )
• Employee Ownership Trusts ( EOTs )
• Trade sales
Enterprise Management Incentives ( EMIs ) Staff retention and incentivisation has become a top priority for employers as a result of more agile working , rising wage costs and inflation . These factors have driven the need to hold onto talented staff . This can be a more acute problem at senior levels where employers require experienced and highly qualified employees , but the pool to draw from seems to have shrunk after the pandemic .
EMIs allow employees ( usually key employees ) to have the opportunity to acquire shares through the granting and subsequent exercising of a qualifying share option .
Management Buyouts ( MBOs ) A common route for exiting a business is through a management buyout ( MBO ). Essentially , this is where the existing senior management team acquires the business . There are a number of ways in which an MBO could be funded , including via thirdparty lending , management equity , deferred consideration and private equity .
An MBO can be a very effective way for an owner to hand over the reins of the business to a trusted management team while simultaneously ensuring that they receive a fair price for the business .
Employee Ownership Trusts ( EOTs ) EOTs were brought in by the government in September 2014 with the aim of encouraging
ownership structures in which all employees have a stake in the business . While there are generous tax breaks available for owners who sell their shares to an EOT , there are a series of rules which must be followed for the EOT to be valid ( unlike an MBO ).
Trade sales Trade sales often take place between businesses in the same industry , with buyers typically seeking greater economies of scale , a diversification in their core product offering or an extension to their customer base .
We are here to help For further information or if you have any questions in relation to succession planning please get in touch .
Local Offices : Ashford : 01233 629 255 Canterbury : 01227 454 861 Maidstone : 01622 690 666 Orpington : 01689 827 505 Sandwich : 01304 249 997
www . azets . co . uk
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