Growth company with shareholders working towards exit

Business sector: IT

Turnover: £8m

Shareholder/business goals and challenges

  • Shareholders working towards exit in medium term
  • Needed to align interests of shareholders with those of key employees with a view to a sale and to ensure motivation in the event of any earn-out consideration on sale
  • Retention of key employees essential to build business value and maximise eventual sale proceeds

What we did and achieved

  • Implemented tax efficient share option plan for key employees
  • Exit driven incentives with awards lapsing in the event of employees leaving pre-exit
  • Significant growth in value during 5 year life of plan with 10-fold increase in value between launch of option plan and sale of the company
  • Employees shared in 10% of value at sale (circa £2m) with gains taxed at only 10%
  • Significant corporation tax windfall to the selling shareholders on sale which increased sale proceeds
  • Employees incentivised during 2 year period post-sale to maximise earn-out consideration on sale, ensuring alignment of interests with selling shareholders 

About the author

Sebastian Salt Senior Associate

Seb specialises in the design and implementation of employee incentive arrangements.