4th July 2025
Employee Ownership Trusts (EOTs) have now evolved from a niche succession strategy into a mainstream business model. In an M&A landscape increasingly shaped by private equity, they present a welcome alternative for founders prioritising legacy, values and people.
An initial attraction for many founders is that a qualifying sale, done within this unique structure, will benefit from a full Capital Gains Tax exemption on the proceeds. However, the tax tail should not wag the dog. The true benefit in the EOT model is the sharing of value more fairly among those who create it and, in doing so, maintaining continuity, keeping culture intact and supporting employee morale, motivation and retention.
Some industries are particularly well positioned to benefit from an EOT, including those that define the economic landscape of the North West.
Professional services firms are first and foremost people businesses; their value deeply tied to their workforce which inevitably means the ever-present talent war to attract and retain high performers is one of the sector’s greatest challenges.
These firms currently find themselves the focus of increased private equity interest but, while this brings capital and commercial discipline, there is also pressure to deliver returns on a timetable that doesn’t necessarily align with long- term client relationships or the culture of these traditionally conservative professions.
EOTs offer an alternative exit strategy, preserving the ethical standards and client-focused approach that underpin the professional services market, while attracting and retaining key talent by giving those who want to share in the long-term value they create a real stake in the company’s growth without personal financial risk.
The North West is a powerhouse of UK manufacturing and it’s this sector where EOTs are really gaining traction. These businesses often have long-term employees, a strong culture of pride in their craft and product quality, and a desire to protect jobs and community roots. This, alongside reliable cash flows that support EOT deal structures, makes the model an obvious fit.
Operationally, ownership among staff can directly translate into increased productivity, reduced absenteeism, higher safety compliance and stronger quality control, which are all significant drivers of profitability in this sector.
Understanding where EOTs thrive can help founders and boards make more informed, strategic decisions and, while industry alignment is key, the best indicator of EOT suitability is culture. Firms that already treat employees as stakeholders with open communication, transparency and shared values are much more likely to succeed post transition.
From an advisory perspective, stable cash flows to fund deferred consideration, strong leadership below the founder level to support post-exit management and a genuine desire from owners to preserve legacy and employee welfare are the best indicators that a business is well positioned to succeed under employee ownership.
EOTs are more than a succession strategy – they represent a philosophical shift in how value, responsibility, and ownership are distributed in a business. For industries where people are the primary asset, where culture is critical, and where legacy matters, EOTs aren’t just a good fit, they can be the best way forward.