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£1Bn+
of EOT transactions advisedOne Team.
One Engagement.
Full service.
An integrated approach bringing together all the required professional disciplines.
RVE combines a corporate-finance led approach to transactions (meaning a focus on valuation, deal structuring,stakeholder management and project management) with tax clearance and legal services. The RVE team comprises of chartered accountants with extensive corporate finance experience at PwC (London) plus an experienced corporate lawyer.
“One team that does the whole deal.”
- Tom Lethaby, RVEOne team that can do the whole deal.
We offer “one stop shop” advisory service, managing the EOT transaction process from start to finish and providing the necessary corporate finance advice (valuation and structuring), tax clearance advice and legal input to get the transaction done. We can also take on the initial independent trustee role, which a lot of clients find very useful.
So with RVE you only need to appoint one adviser (who will work on a fixed fee quote) as opposed to having to appoint two or three different advisors and hoping they agree on matters and can coordinate their work.
Corporate finance-led approach
Feasibility Analysis, Valuation, Deal Structure and Heads of Terms
Tax Clearance
Legal Documentation, Briefings and Completion
Post Completion Support
Independent trustee, first 12 months
Our Corporate finance-led approach ensures that
We take time to understand the objectives of the shareholders, key management and employees, and the corporate history of the company, to structure a transaction which will deliver the tax and economic benefits of employee ownership and satisfy stakeholder objectives. We believe this approach adds significant value.
Feasibility Analysis, Valuation, Deal Structure and Heads of Terms
The first step in our approach is to assess whether the company and its shareholders will be suited to an EOT structure. Our feasibility analysis considers whether the shareholders will qualify for EOT Relief, and whether a sale to an EOT would be preferable to other exit options (such as a trade sale or sale to a financial buyer) 2025 Budget EOT.
We then undertake a high level, indicative valuation so that shareholders can understand whether an EOT transaction is likely to meet their value thresholds.
We then consider the transaction structure. For example, are there assets (such as non-trading properties or assets whose value may be dependent upon a contingent event) which would be more tax efficiently held by shareholders rather than the Company, do all shareholders wish to sell their entire holdings or do some wish to retain a minority stake, and are their shareholders in key management roles who wish to retire soon after the EOT transaction completes, which may mean the board needs to be reconfigured.
We bring together this initial analysis into a Heads of Terms document, which sets out clearly and concisely how the EOT transaction will be structured and the financial impact of the transaction on shareholders and the Company.
Tax Clearance
After Heads of Terms have been agreed, we then complete a formal valuation of the Company and manage the process of obtaining tax clearance for the transaction from HMRC.
An EOT transaction will involve the bulk of the purchase consideration being funded by the Company. The Company makes distributions to the EOT which the EOT then applies to settle the purchase price due to the vendor shareholders.
Assurance is required for both the shareholders and the Company, that the distributions will not be taxable as income in the hands of the vendor shareholders. This is achieved through a Transactions in Securities (“TIS”) pre-clearance application.
RVE has successfully managed the TIS clearance process on over 40 EOT transactions over the past six years. Clearance is typically received 3-4 weeks after the application letter is submitted.
Legal Documentation, Briefings and Completion
Once TIS Clearance has been received, RVE’s in-house lawyer will draft the transaction documentation based on the Heads of Terms and will oversee the establishment of the Trustee Company (which administers the EOT).
The key legal document (the Share Purchase Agreement – “SPA”), which sets out the detailed legal terms on which the EOT is buying the shares in the Company from the vendor shareholders, is drafted to achieve a balance between the interests of the vendors and the purchaser. RVE brings its extensive experience of advising on EOT transactions to achieve this balance.
We arrange briefing sessions for the vendor shareholders, and for the trustees (acting on behalf of the EOT as purchaser), so that they clearly understand the legal documents and how the price has been determined based on the RVE formal valuation document.
Our in-house lawyer will then manage the legal completion process, circulate a post-completion checklist and compile a “Bible” of signed documents for the participants.
Post Completion Support
Once completion has taken place, RVE remains involved with the Company, the EOT and vendor shareholders for a period of 12 months. Our role is to ensure that post-completion filings have been correctly reported (e.g. to Companies House, HMRC, within statutory accounts) and that the new corporate structure that has been put in place, through which the Company is controlled by the trustees acting on behalf of the EOT, has bedded down and key stakeholders understand their role in the new structure.
Independent trustee, first 12 months
As part of our post-completion services, RVE can provide an independent trustee to sit alongside the other trustees who are administering the EOT. A typical structure is for the EOT to be administered by an employee trustee, a founder / vendor shareholder trustee and an independent trustee – this mix ensures that all key stakeholders are represented with the independent trustee providing useful professional guidance.
Alternatively, the Company can source an independent trustee (e.g. a practising (or retired) accountant, lawyer or financial adviser who knows the Company well) and RVE will be available to provide technical advice to that independent trustee.
We are accountants and lawyers, with a corporate finance background.
An EOT transactionis a corporate sale. The Company is being sold to a third party (the EOT), which is administered by its trustee, at a price set by an independent valuation. It is a unique type of corporate finance transaction with tax, accounting, legal and governance consequences and the Company and its shareholders require professional advice in each of these disciplines.
The key person at the Company (which may be the Founder, or the Managing Director) could choose to appoint separate advisers and co-ordinate their work, but this can be a time-consuming and challenging project management role.The RVE approach is to take on that project management role and to provide the full range of professional advice needed for the transaction. This model has worked well on over 50 EOT transactions over the past 6 years and is what our clients tell us they prefer.
“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.”
- Chris Ash, AscentoTrusted advisers on over 50 EOT transactions
RVE has advised on some of the largest and most complex EOT transactions, including the £275m sale of TTP Group, a Cambridge-based research consultancy in 2021. However, the bulk of the transactions on which we advise are Founder-owned companies with a value of £2m-£10m.
Our team has delivered over 50 transactions across a very broad range of sectors including professional services, manufacturing, veterinary practice, recruitment, security, water and fire engineering and many more.
Total transaction value:
of EOT transactions advised across over 50 deals.
Where RVE adds value on an EOT transaction
RVE is an independent corporate finance advisory boutique, and we always undertake a feasibility analysis for a client before recommending an EOT transaction. Sometimes a conventional sale (to a tradebuyer or financial buyer) or a sale to existing management (through an extended earn-out structure) can be a better solution. We take time to understand the objectives of the shareholders, key management and employees, and the corporate history of the company, to structure a transaction which will deliver the tax and economic benefits of employee ownership and satisfy stakeholder objectives. We believe this approach adds significant value.
A complete service from start to finish.
Eight stages. Between 12 and 18 weeks end-to-end for a typical deal.
Initial feasibility review
Proposal and data gathering
Transaction structuring
Heads of Terms
HMRC Clearance
Legal drafting
Communications
Completion
How our integrated approach helps the owners on a recent transaction.
Corporate Finance for EOT Sales - common questions.
The owners get a full market price for the shares that are sold to the EOT. The purchase consideration typically comprises a cash payment at completion (paid out of surplus cash in the business) together with loan notes which the EOT repays over an earnout period (typically 5 - 8 years in length) using cash generated by the business.
Deal risks on an EOT transaction are much lower than on other exit routes because there is a clear buyer (the EOT), the price is set by an independent valuation, there is no requirement for external financing and because negotiations are “in-house” involving just the owners, the company and the EOT. The key deal risks for an EOT transaction are the owners changing their mind over whether to sell and unforeseen changes in the trading outlook for the business.
The vendor loan is the deferred consideration owed to the selling shareholders, typically repayable from future Company profits over 5-8 years. Interest is not usually charged on the balance of the loan. The loan is structured so that the Company can repay in flexible instalments, without having strict financial covenants which might lead to an event of default, but the vendors also have protections to ensure that their position as a de facto creditor of the Company is not compromised.
Existing shareholder agreements are terminated and the Company’s articles of association are reviewed and amended to accommodate the new EOT structure.
If there are minority shareholders in the Company, such that the EOT holds a majority of the shares in the Company (eg 75%) but certain shareholders have retained a minority stake (eg 25%), the Articles will be amended to include minority shareholder protections: pre-emption rights, equivalent dividend treatment and exit mechanics (“tag and drag”).
The EOT will be the controlling shareholder but will have an obligation to consult with the vendor shareholders (for so long as any deferred consideration remains outstanding) in relation to “Reserved Matters”, being material corporate actions which might prejudice the ability of the Company to fund the outstanding deferred consideration.
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.
An independent valuation sets the price for the shares being sold to the EOT. The valuation is carried out by an independent professional (such as RVE) and comprises of: a)the business value (a market multiple of the Company’s sustainable profits), plus b) surplus cash or other surplus assets, less c) debt. The sale consideration is funded by the Company itself, with any surplus cash within the Company utilised to pay some of the sale consideration at completion, with the balance payable over 5-8 years out of the future profits of the Company.
EOT Relief is available on the sale of shares to an EOT, which reduces the effective rate of CGT on the gain realised by the selling shareholder(s) to 12%.
The valuation sets the price for the shares being sold to the EOT. The valuation is carried out by an independent professional (such as RVE) and comprises: a) the business value (a market multiple of the Company’s sustainable profits), plus b) surplus cash or other assets, less c) debt. The valuation sets the price receivable by every shareholder selling into the EOT, on a per-share basis. To obtain EOT Relief on the sale of shares to an EOT the price receivable must be no greater than market value, hence a valuation is required to satisfy this condition.
Dr Peter Taylor, Chairman of TTP Group.
"We almost missed the opportunity to make it happen for our business. Do look at EOT very seriously, the flexibility and scope to meet the needs of the business is greater than you would expect."
“Independence and self-determination is very important, particularly in a technology business where there is quite a lot of risk-taking. The collaboration, the working together, the teamwork is all reinforced by employee ownership.
When you are trying to do something that has never been done before, having a lot of external shares challenging from perhaps not fully informed points of view does constrain what you can do. The culture that employee ownership allows, and the collaboration it encourages, has enabled us to do things that we could not do in another form of ownership.”
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.
For accountants, lawyers, and wealth managers
Are you working with a client who should be considering a sale of their business to an EOT? We will complement the work you do to deliver an optimal outcome for your client.