Ascento EOT Sale, Apprenticeship Training (2021)
How RVE advised on the apprenticeship training EOT sale of Ascento completed in 2021, with the corporate finance, tax, legal and trustee work delivered as one engagement.
Deal Facts
“RVE were excellent. They are a very experienced and intelligent team and a nice bunch to work with. They took time to understand our business, our culture and then advised accordingly. Elaine and Gerry in particular were brilliant and will continue to provide support in the future I am sure.”
The story of the deal
June 2021
Ascento is an apprentice training business based in Dronfield, Derbyshire. It was founded in 2009 by Chris Ash and his wife Kathryn, and has since grown into a sizeable business with 21 employees.
In May 2021, Chris and Kathryn sold 87.5% of their shares in Ascento to a newly formed employee ownership trust (“EOT”). RVE Corporate Finance advised on the transaction.
Shortly after completion of the transaction Gerry Young of RVE spoke to Chris Ash:
Q: When and why did you start thinking about transferring control/selling Ascento?
It was early last year that we started thinking about it seriously. We had discussed selling for a number of years and we’d had a couple of approaches about buying the company. This was coupled with ongoing conversations we’d had over the years about how we would connect employees and several key people with the success of the business (share options / profit share etc).
Q: How did you first become aware of employee ownership?
I had researched various options for selling the business and was always looking at what was out there. An article about Richer Sounds, located in Sheffield, which was sold to an EOT in May 2019, prompted us to look at Employee Ownership options. That prompted us to join the Employee Ownership Association (EOA) as well as read a variety of books and articles on the subject.
Q: How did you explore/evaluate the concept and practicalities of employee ownership?
We attended a few EOA meetings online, talked with lots of people and sat in on a number of Q&A’s with owners who had gone through the process. RVE were happy to put us in touch with organisations that they had worked with and we received a very honest appraisal of the process. We also spoke to several advisers recommended by the EOA and found RVE in particular to be very helpful.
Q: What other options for Ascento competed with Employee Ownership?
We had explored trade sale, private equity sales, MBOs, mergers as well as the option of doing nothing.
Q: Why did you feel employee ownership was the right option for Ascento?
Selling to a trade buyer, or having a Private Equity fund take us over, would have dramatically changed the company and put all the team’s work at risk. For us, any sale would have potentially damaged the business culture and led to changes not in line with the business we had tried to create.
Q: Do you see any downsides to Employee Ownership?
It’s easy enough to be an EO company. It’s quite hard to be a good EO company! It takes work to “make it real” after the transaction, to really find that balance between giving a voice to employees while also trusting your own judgement as the ongoing directors about steering the company in the best direction.
Q: Any wisdom you would like to share with business owners currently looking to sell their business/reduce their day-to-day responsibilities/commitments to their business?
We’re really happy with the decision. No regrets. It’s great to be able to sell the business without bringing in external influences with their own agendas. It’s important not to over-hype the roll-out to the team. EO is what you make of it and it takes time for the team to see real changes and benefits.
Q: Anything you would have done differently?
It has been challenging due to much of the process taking place remotely in 2020/21. We have kept employees informed but with hindsight we would have involved people in attending more of the Employee Ownership Association workshops to help improve knowledge and understanding.
Q: How does the future look for Ascento?
The future looks very positive. We have grown the senior team and appointed new directors to take things forward. Everyone sees the benefit of being successful and can see how they can share in the benefits of this. We’ve a great team, all pulling in the same direction which is great.
Q: What’s next for you and Kathryn?
We’re still directors of the business. Learning (slowly) how to meddle a little less and hand over the reins to the team a little more. We’ve given ourselves a year to complete the transition properly and then see how things look on the other side of that, gradually reducing our involvement.
We’ll take some time for a well earned rest and then re-evaluate what, if anything, to do next.
Q: Any comments on RVE, the service provided and the process of conversion?
RVE were excellent. They are a very experienced and intelligent team and a nice bunch to work with. They took time to understand our business, our culture and then advised accordingly. Elaine and Gerry in particular were brilliant and will continue to provide support in the future I am sure.
Related case studies
Case Study - common questions.
Yes. Most founders / controlling shareholders stay on as director (and often as chair or CEO) for between 1-5 years post-completion, then transition to a part-time non-executive or consultancy role. You agree your role and time commitment with the trustee board; there is no requirement to exit operationally. Many founders find the post-EOT phase the most rewarding part of their career, with a clear financial exit having been arranged and a plan for management succession in place.
EOA research consistently shows employee-owned businesses outperform privately-held peers on productivity, profitability and employee engagement. RVE founders consistently report that their businesses perform ahead of plan post-completion, with vendor loans paid down ahead of schedule. The cultural alignment and engagement boost typically delivers measurable productivity gains within the first 12 to 24 months of EO. Growth depends on the business; the EOT structure does not constrain it.
The deferred consideration due to the vendors is repayable from future company profits, typically over a 5-8 year period. So if the business genuinely struggles, the term of the loan note may need to be extended by 2-3 years. In extreme circumstances, some of the vendor loan may need to be written off (eg if the business were to become insolvent).
The vendors do therefore retain business risk relating to the ultimate payment of the sale consideration under the EOT model.
If the business outperforms the original projections however, the vendor loan can be accelerated, and some vendors have been paid out in full within 4 years.
We are happy to talk over Teams or meet to discuss your exit planning.
We can normally assess whether an EOT transaction will be viable and the likely valuation range at our first meeting.
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