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Adviser dodges consolidators to sell firm to staff

Adviser dodges consolidators to sell firm to staff

The director of Ovation Finance has sold the business to its employees, creating a John Lewis-style ownership structure.

Chris Budd sold the majority of his business to an employee ownership trust, which will own any profit his firm makes and which will have, as its beneficiaries, all the employees of Ovation. 

In a blog on his website Mr Budd said he did not want to sell Ovation, which is based in Bristol, to a consolidator nor did he want sell shares to employees.

"Not all could afford to buy them which would create a ‘have and have not’ culture. Besides, this wouldn’t solve the problem, it would just be handing it on. They’d have the same problem of selling their shares one day.

"The business is called Ovation Finance Ltd, not Chris Budd Ltd. I always had the idea that it was going to outlive me. I have therefore been embarking upon a plan over the last 10 years or so to make myself the least important person in the business.

"This has involved making changes in four main areas, including having a clear vision for the business; employee engagement; and getting employees involved with decision making.

"The final step in this process was to find an ownership structure that would allow me an exit but would not place a burden, in the form of debt, on others."

Mr Budd said there were also tax advantages to this structure, since as long as the trust owns a majority of the business, the payments it receives are free of capital gains tax. Additionally, the employees receive up to £3,600 of their payments free of income tax.

He added: "Everyone wins. The owner gets a way out, the employees get a way in, and the clients not only continue being serviced by the company, but by a company whose focus is not on maximising its short term value value but on long term sustainable profit."

Mr Budd sold his shares to the trust which will gradually pay him for his stake over an agreed period of time from the profits of the company. Once this has been completed, all profit will be available for the employees.

He said he will retain a minority stake in Ovation and continue as the company's chairman.

Of the 280,000-odd businesses in the UK with between 10 and 250 employees, only some 320 of them are employee-ownership trust businesses.

One of biggest employee-owned companies in the UK is the John Lewis Partnership, which runs Waitrose and John Lewis, whose employees are partners in the business and receive a share of the company's profits as an annual bonus, with all employees receiving the same percentage of their salary.

Mr Budd said he was setting up a consultancy business, called The Eternal Business Consultancy, to help other firms transition to employee ownership and he would be publishing a book on the subject in the autumn.