Why transitioning to employee ownership was the best option for high-growth IFA | Guest Blog
In this guest blog, EOA supporter member ThinCats takes a closer look at the motivation for high-growth independent financial advisors (IFA) Cheetham Jackson (CJL) to make the transition to employee ownership, and why it sought external finance to fund the move to an EOT.
Employee Ownership Trusts (EOTs) are often recognised for their tax-saving advantages, but this misses the bigger picture. There are much broader benefits to taking the EOT route, and selecting this model is frequently based on ‘philosophical’ considerations as much as financial ones. There is also a lack of awareness around the various options available to fund the transition, including the use of external capital.
Founded in 2009 by Stuart Jackson, CJL is an independent financial planning business that has grown significantly over the last few years and now operates out of 10 offices across the North of England. Specialising in wealth management for the long term, it offers services related to investments, pensions, ISAs and inheritance tax.
Having successfully guided the team for more than 11 years, Stuart had been planning his succession for several years, but why did he and the senior leadership team decide that transitioning to employee ownership would be the most logical next step for CJL’s future?
Turning an idea into reality
First and foremost, CJL is a people-focused business, so ensuring culture remained at the centre of the succession plan was paramount. Building leadership capabilities from within was another important aspect as to why EO was the right route.
Stuart wanted to find a solution where a ‘meaningful’ stake for employees went beyond financial participation, and an EOT ticked this box, as it underpins organisational structures that promote employee engagement.
Describing the process, Stuart said: “When we started planning for this transition, Managing Director Nikki Jones and I identified the need to build an exceptional leadership team, providing the depth of experience and breadth of scope to carry the business into its next period of sustainable growth.
“As the business moves to an EOT model, the culture of collaboration that being employee owned brings is vital and I am delighted that all 77 of our employees will now benefit from the new structure.”
Unlike other exit scenarios, the day-to-day hasn’t changed dramatically as Stuart remains Chairman of the Trust, although full operational running of the business will transition over the coming years as Stuart and Nikki continue to develop the leadership group within Cheetham Jackson.
Nikki, who previously held the position of Director of People and Culture, has led on embedding a responsibility-based leadership approach and responsibility-based culture within the business.
How CJL worked alongside ThinCats
Cheetham Jackson needed a funder who not only had the expertise to facilitate a transition to the new EOT model, but one that was able to provide a bespoke package that could support growth.
Mike Dinnell, Director Business Development, who led the ThinCats deal team on the transaction, was able to structure a solution that gave visibility to the shareholders for the transaction to happen, but also confidence that we could offer a larger funding line against projected future performance.
The facility allowed for an element of day one funding and a future commitment that can be drawn against when the business reaches certain milestones. Essentially, this incentivises all employees who have now become shareholders to achieve their growth ambition over the next 18 months to two years.
Commenting on the transaction, Mike said: “Stuart, Nikki and the team at CJL have created a positive culture which they are keen to retain as the business continues to grow.
“They have a clear plan to execute over the next five years and under EOT ownership all employees will benefit. It’s been a real pleasure to support the CJL team and help them on their journey.”
ThinCats’ slogan is ‘helping the mid-size thrive’, citing how mid-sized SMEs often struggle to access the finance they need and that it ‘exists to fill this gap’ by providing long-term funding. ThinCats is a supporter member of the EOA having helped fund numerous businesses transition to EOT status through the creation of bespoke funding solutions.
Find out more via ThinCats’ EOT hub here.