It started as a trickle, but now MSPs, IT consultancies, resellers and distributors are joining the UK’s employee-owned revolution in significant volumes.
At least 18 UK IT providers on IT Channel Oxygen’s radar are now employee-owned (see final page for full list), with six of these converting last year.
The model sees business owners handing a controlling stake in their business to employees via an Employee Ownership Trust (EOT).
Proponents of the model – which was introduced by the government in 2014 and mimics the famous ‘John Lewis’ style of ownership – say it can safeguard the culture of a company and boost employee morale and productivity.
There are also tax benefits for owners looking for an exit.
The EOT revolution
But why are so many MSPs and other channel partners converting to EOTs, what mistakes or missteps have they made, and does the model really work?
Here we catch up with top executives from seven IT providers that have made the leap.
This includes the Group MD of a Scottish MSP who opted to convert his firm to EOT status in 2022 to safeguard jobs from moving offshore, and the co-founder of a data management consultancy who wanted to give every employee “the owner’s eye”.
It also includes the leader of a Cambridge-based IT support outfit who – after hearing John Lewis’ CEO talk – was inspired by the idea that employees who have a stake in the company are more motivated and invested in its success.
You can see a full list of the MSPs, IT consultancies, resellers and distributors we know of who have become EOTs on the final page…
There are now over 2,000 employee-owned businesses in the UK, according to the Employee Ownership Association.
So, is employee ownership the way forward for your company? Read on to find out…
“It was important to me that the business remained in Scotland”
Microtech (employee owned since 2021)
Specialism: IT support and solutions
HQ: Kilmarnock
Staff: 75
Q&A with Group MD Chris McMail
What was the trigger for you becoming an employee-owned business?
Microtech has been based in Scotland for 30+ years and NHS Scotland was and still is an important customer. It was fairly obvious to me that if we sold the business to a bigger UK company or private equity, they would likely move the support side of the business away from Scotland and likely overseas. It was important to me that the business remained in Scotland.
What was the most challenging aspect of becoming an EOT?
To be perfectly honest there was nothing that was particularly challenging, especially compared to a trade sale where we would expect considerable due diligence. I had strengthened the management team in the years prior in the expectation that I would exit 100%. I did pick an excellent team (tax advisor, EOT consultant, business advisor, corporate lawyer) to support the process.
In terms of the employees, for the most part it was business as usual.
You’ve been an EOT for four years now. Has it had any impact on any of your KPIs (for instance staff retention)?
We definitely have better staff engagement and we are fortunate that the business is profitable so the staff benefit from annual bonuses.
We now have an employee council which meets regularly and feeds into our board meetings.
What’s the biggest upside of being an EOT?
It has taken a few years for the employees to understand the implications because for the most part it was business as usual, which is really good from an employee and customer perspective. However, now we are getting some really good employee involvement and ownership.
Are there any drawbacks?
None, although for me personally I had to learn that decisions were no longer solely mine. Which would be the same if we had done a trade sale or PE.
What message would you have for other MSPs or IT consultancies contemplating becoming an EOT?
I would have no hesitation in recommending it. It is highly beneficial from a financial perspective for a full or partial exit for the current owners. It is a relatively straightforward process, with the right team and perfect for rewarding employees loyalty and commitment.
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