Business Succession lacks realistic options in Ireland

Ahead of the Irish Proshare Association’s annual Employee Share Ownership Day (ESOD18), CEO Gill Brennan warns of a potential risk to employment and revenue that has been overlooked by successive Governments.

Gill Brennan, CEO IPSA said: “Many SME founders and owners are coming close to retirement age. By 2020, it is estimated by the CSO that 92,900 people in the labour force will be aged 65 and over, and by current trends a large proportion of that number will be thinking about retirement.

“Based on available data we can assume that a minimum number of these, 1%, are SME business owners, that’s 929 businesses across the country. Based on CSO data, we can assume that these businesses employee on average 30 people per business, that’s 27,870 people. And by current CSO figures that’s 27,870 people contributing approximately €40,000 GVA per person, a total of €1.12bn to the Irish economy.”

Ms Brennan points out that the number of owners reaching retirement age is a major concern as the present succession options are too limited and could lead to large numbers of these businesses closing. For many owners who do not have family members to take over the options presently are limited to a Stock Exchange listing, a trade sale or a sale to private equity including management buyout. Not all of these will be preferred options to many SME owners.

Gill Brennan continued: “We have witnessed the closure of some well-known businesses where the founders prefer to wind-up the company rather than sell to a competitor. If this was to continue unabetted it could lead to the loss of several thousand jobs and huge economic reverberations for the local and national economies. Based on our assumptions above that would be 13,935 out of work and most likely dependant on the State – putting pressure on social welfare resources. What’s more that would be €560m taken out of the economy and putting a nice little dent in future national growth plans.”

One viable and proven solution has been ignored by successive governments to date. At ESOD18 IPSA will be calling on the Government to put in place a legal framework that will make a sale to all staff of the business through an Employee Ownership Trust (EOT) available to SME’s.

Selling the business to an EOT gives the seller a competitive price and a guaranteed exit from their business. The process and the model are proven to reduce the risks that are usually associated with transferring ownership and leadership too.

Several keynote speakers at ESOD18, including Sarah Deas, Head of Inclusive Models with Scottish Enterprise, Rhian Edwards, Project Manager with Social Business Wales, and Deb Oxley, Chief Executive of the Employee Ownership Association UK, will discuss in detail their experiences implementing similar schemes in their own jurisdictions. Together they have spearheaded campaigns that have resulted in companies across the UK using the employee ownership models available to them and employing over 200,000 people.

Deb Oxley, Chief Executive, Employee Ownership Association Said: “Employee ownership offers an effective solution to challenges faced by the UK and Ireland and especially at the point of business succession, it helps to root jobs, secure supply chains and deliver more resilient and productive businesses.”

Gill Brennan said: “There are many long-established companies that you will recognise as employee owned; Arup, Global Shares, Lush Cosmetics, and the biggest of the all, the John Lewis Partnership, comprising John Lewis and Waitrose to name a few. The employee trust model in the UK is clearly tried and tested. There is a lack of awareness or a willingness to discuss this ownership model in government circles. We believe this is very short-sighted and will keep working to ensure they listen before it is too late.

ESOD takes place on the 21st June at The Foundry in Google on Barrow Street in Dublin. Booking can be done through www.IPSA.ie

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