EQ supports Fife engineering firm’s move to employee ownership

EQ Chartered Accountants LLP has supported Ladybank-based G S Brown Limited into an Employee Ownership Trust structure.

In a move that secures the business in its Fife location, owners Des and Mike Brown transferred the majority of the company’s shareholding to the Trust for the benefit of the company’s 27 employees.

Established in 1974, the second generation family business has a worldwide reputation for excellence in precision engineering.

Utilising the latest machine tool technology, the company is recognised as a progressive manufacturing facility providing high precision engineering components and assemblies, in medium to high volume, for the hydraulics, robotics, telecommunications and instrumentation sectors. The company operates with a state of the art ERP system that gives full transparency of production, costs and resource.  

70 per cent of the shareholding will be held in an Employee Ownership Trust, with the family retaining 30 per cent, demonstrating the family’s ongoing commitment to the business. One of the conditions of the deal is that any future sale of the company requires the agreement of 80 per cent of the workforce.

The move was part of the succession plans for the family owners.

Managing Director, Des Brown plans to remain in that role for the medium term and, with Mike semi-retired, both brothers wanted the business to remain local. 

Mr Brown said: “The majority of our staff have been with us a very long time.  We have our reputation and our customers because our staff do a very good job. A sale to an external buyer would have been too disruptive. By transferring to an Employee Trust we have a long term structure where we can continue as before, and maintain our relationships with customers and suppliers.”

Dougie Rae, Partner at EQ assisted the company with reaching a fair valuation, and advised on the Trust tax benefits. Dougie has worked on a number of these transactions and understands the advantages for companies and the original shareholders.

“The Employee Ownership Trust is certainly one route worth considering for business owners considering their succession options. A sale to an Employee Trust can deliver a tax effective means to realise reasonable market value in the company, whilst allowing the owners to decide on the pace and form of their own exit. It’s good news for employees; they can effectively own the business without having to raise their own funds.”

The company is very pleased with the advice received from EQ.

Mr Brown added: “Dougie Rae is obviously an expert in this field and we knew we were in safe hands.  We are more than happy with the outcome and believe GS Brown is now in a strong position to continue to grow and meet the opportunities of the future.”

The transaction was also supported by employee ownership specialists, Ownership Associates UK, and legal advice provided by Thorntons Law.