Beta Valve Systems is a company specialising in the distribution and manufacture of solenoid valves (small electrically operated valves) that form a vital link between computers and the real world control of water, air, oil, gas...in fact almost any fluid.

When our founder and majority shareholder Ian Sparrowhawk decided to retire, the exit strategy he adopted was to organise an employee buy out (EBO) of the company by selling the shares in the company to an Employee Ownership Trust (EOT), with the employees becoming members of the trust.

Benefits to the seller

This had a number of advantages for Ian and the employees: an independent valuation of the company meant Ian and his family received a fair price for the company, other terms of the EBO could largely be set by him and he could also, by ensuring the continuity of the company in its current form, recognise the contribution made by his employees to the success of the company. Ian could also enjoy the modest CGT tax concessions that are in place for owners selling to an EOT. Selling the company to a trust was simpler than co-ordinating a sale to employees individually and requires minimal ongoing administration.

Benefits to the employees

Although still a conventionally managed company with a managing director and management team running the company, all of our employees - from stores to accounts - now have a voice in the running of the company. Indeed the trust deed requires that employees are consulted on important decisions that will affect the company. But Beta Valve have gone beyond this; our regular monthly (normally on the first Monday after the purchase ledger has been posted) meetings are where all staff get to see how the company performed financially the previous month and have a say in how this might be improved. 

Beta are trying to do EO well, and are trying to use it (as others have) to encourage greater employee commitment and engagement. We want our employees to feel able to voice their ideas, because it is their company, and for them to know their ideas will be listened to so that we can increase profits through greater productivity. At the same time we want to promote a happier staff through enhancing employee wellbeing. Employee ownership has already brought a sense that everyone has a stake in the business. The management team attempt to offer clarity of purpose and transparency, as well as appreciation of employees’ efforts.

A management buy-out might have incentivised a few people, but EO has incentivised the whole workforce. As beneficiaries of an EOT, staff at Beta can also look forward to the prospect of a tax free bonus of up to £3,600 per employee per tax year.

The core of Beta’s business is supplying original equipment manufacturers (OEMs) who require a stable and secure supply chain to provide them with components for the products they make. Long standing customers and suppliers are assured by the continuity that the transfer to EO brings; a trade sale potentially to one of Beta’s competitors would have inevitably led to unwelcome changes affecting these key stakeholders.

It’s still early day for EO at Beta Valve, but so far the signs are good.