An engineering firm has moved into employee ownership, saying this secures the second-generation family business in its Fife location.
EQ Chartered Accountants LLP has supported Ladybank-based GS Brown into an employee ownership trust structure.
Owners Des and Mike Brown have transferred the majority of the company’s shareholding to the trust, to the benefit of the company’s 27 staff.
Established in 1974, the firm is billed as having a “worldwide reputation for excellence in precision engineering”.
It uses the latest machine tool technology, and is seen as a “progressive” manufacturing facility providing high-precision engineering components and assemblies, in medium to high volume, for the hydraulics, robotics, telecommunications and instrumentation sectors.
A total of 70 per cent of the shareholding will be held in an employee ownership trust, with the family retaining 30 per cent. One of the conditions of the deal is that any future sale of the company will need the agreement of 80 per cent of the workforce.
The move was part of the succession plans for the family owners. MD Des Brown plans to remain in his role for the medium term and, with Mike semi-retired, both brothers wanted the firm to stay local.
Des Brown said: “The majority of our staff have been with us a very long time. A sale to an external buyer would have been too disruptive. By transferring to an employee trust, we have a long-term structure where we can continue as before, and maintain our relationships with customers and suppliers… [we] believe GS Brown is now in a strong position to continue to grow and meet the opportunities of the future.”
EQ partner Dougie Rae helped the company with reaching a fair valuation, and advised on the trust tax benefits. Rae, who has worked on a number of such deals, said: “A sale to an employee trust can deliver a tax-effective means to realise reasonable market value in the company, whilst allowing the owners to decide on the pace and form of their own exit. It’s good news for employees; they can effectively own the business without having to raise their own funds.”
The transaction was also supported by employee ownership specialists Ownership Associates UK and legal advice provided by Thorntons Law.
There are currently around 100 employee-owned companies operating in Scotland, with about 7,000 employee-owners generating a combined turnover of about £940 million.