case study 1 - employee ownership

 

Scaleways Leicester Ltd - Servicing and supply of weighing equipment

In his seventies with no family members interested in inheriting a successful business, our employer wanted to retire. As employees we realised we had over 60 years experience in a successful company, and good relationships with longstanding customers. We were afraid a competitor would buy the business for the customer list, or the owner would have no choice but to liquidate the business – either way we thought redundancies would come. The employees decided to go for a buy-out when the idea was introduced to us – after all this business was built up with all our hard work over the years! But we had never thought of ourselves as company directors!

We worked closely with Leicester and County Co-operative Development Agency on our business planning and legal structure. We accessed loan finance towards the purchase price of the business from the CDA’s special loan fund for co-operatives and from Industrial Common Ownership Finance (ICOF) a lender which also provides loans to co-operatives and other socially owned businesses around the country.

Is going for an employee buy-out plain sailing? No it isn’t! You have to expect the unexpected – complex negotiations on the buy-out with our employer when we were also working for him. We learnt a lot as we went through the process with the support of the CDA staff. They believed in us from the start, as we had in depth knowledge of the business, a well organised administrator, and we showed we were committed to the idea by putting in a lot of work after our normal working hours on the business planning. We knew the business was a good one and it was a real advantage for our employer to have the buyers "on the spot", with finance, without his having to open up the business to inspection from competitors. Our longstanding customers were really pleased we would be taking over the business and continuing to provide them with the same good standard of service.

The co-operative is structured as a company limited by shares which gives us all a sense of ownership, but decisions are made by one-member, one vote.

It's now five years since the buy-out, we’ve moved to new premises, paid off our loans, implemented quality assurance systems, built up the customer base, and had a regular profit share. On a day to day basis we’re doing the same work, but as company owners we have every motivation to safeguard our future.

Paul Frost

Scaleways Leicester Ltd