International materials technology group completes transition to employee ownership to secure its ‘legacy’

Newcastle-based Key-Tech International Group has transitioned to employee ownership after its founder, Dr Patrick Ferguson, transferred his entire shareholding in the parent company, Key-Tech International Limited (Key-Tech), to an employee ownership trust (EOT).

Key-Tech’s subsidiary NEL Technologies Limited is a leading manufacturer of flexible heater assemblies. It started business in 1984 in Consett, County Durham, before relocating to Newcastle. Continued product development and innovation have enabled it to become a supplier to global blue-chip companies with the majority of sales going to export markets.

Key-Tech has a dedicated workforce in the North East and one of the major attractions of the transfer to the EOT is that it preserves the independence of the group and protects employment in the region.

Dr Ferguson said: “I knew I couldn’t continue to own the group forever, however, I was worried that a trade buyer might at some stage shut down the North East operations and move production out of the area.

“The EOT became an obvious strategy as the group is now owned by a trust which has been established for the long-term benefit of the employees. This will not only protect employment, but it will also ensure the quality of employment is maintained and improved.

“The EOT route provides me and the team with a legacy and ensures that the interests of the loyal NEL Technologies customers are continued to be met. Importantly, it also gives our valued employees a stake in the future of the business and the chance to become owners supporting the day-to-day company activities.”

Guidance helps bring reassurance

The transaction was advised on by the corporate finance and tax teams at UNW LLP and the legal team at Womble Bond Dickinson (UK) LLP.

Steve Lant, Tax Partner at UNW, said: “We are delighted to have supported Patrick and Key-Tech in achieving a smooth transition to ownership by an EOT. Patrick has dedicated over 25 years to running the business and the EOT preserves his legacy in addition to giving a great opportunity for the employees and continuity for customers. I look forward to seeing the business progress in the years to come.”

Jeremy Smith, Partner at Womble Bond Dickinson, added: “I am delighted to have supported the Key-Tech team through the employee ownership process and wish them a successful future.”

Reflecting on the support received from both UNW and Womble Bond Dickinson during the process, Dr Ferguson added: “It was very reassuring to be expertly guided through the whole process by a team with significant experience of working with employee-owned businesses. They were able to cut through the noise and arrive at practical and detailed arrangements which work for the business and employees.”

Employee Ownership Association comment

Employee ownership is one of the fastest growing business succession solutions in the UK, where there are now more than 1,000 employee-owned businesses, with the sector more than doubling in the past three years.

The fast pace of growth amongst businesses has taken off with the use of the employee ownership trust (EOT), introduced by the government in 2014 to encourage long-term employee ownership, and one in every 20 private company sales is now to an EOT, with Key-Tech joining a network of EOTs in the UK that include Richer Sounds and Go Ape.

James de le Vingne, Chief Executive of the Employee Ownership Association (EOA), said: “We congratulate our members Key-Tech on its transition to employee ownership; securing the ethos, values and culture of the business, as well as rooting jobs in the North East.

“Businesses that give employees a stake and a say build trust and shared responsibility, uniting leaders and employees behind a common purpose, and leaving businesses in a better position to flex and adapt.”

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