How has the Employee Ownership Purchase Model worked for ICR?

businessSuccession

In an earlier, January 2015 blog post  I discussed the Employee Purchase of ICR. Nineteen months have passed since that announcement; let’s try and take an objective look at the pros and cons of this method of selling a business.

I believe in both our personal and work lives, where change is involved, it is beneficial to stop and take note of what worked, and what kind of challenges we encountered along the way.

Options that exist for selling a business

The traditional exit options include an equity sale, finding a strategic buyer, or for larger businesses, even going public. The founding ICR Partners  had been approached by a couple of national commercial real estate buyers but after 22 years operating a successful independent firm, they were reluctant to enter into a sale that would have considerably altered the culture of the company.

The Purchase Process

In the case of ICR, we essentially have three separate companies with different management and partnership structures within each company. The negotiation was therefore complex and somewhat different for each entity.

When you have career negotiators, negotiating with career negotiators, the process can be lengthy. Each side engaged the best legal firms available to ensure the resulting agreement was solid. We were able to complete the process, shake hands and continue to work side by side with the collective interest of continuing to grow all of the companies.

The Cons

Can you imagine founding and growing a company over a period of 22 years to the largest independent commercial real estate company in the province and then turning the reigns over to your employees?  I know for me that would be difficult.

Two of the three founding Partners have been transitioning from their previous role wearing hats as both manager and salesmen to the singular role of selling. The third founding Partner has just retired but retains an important presence in our monthly management meetings.

It is not a process that can happen overnight but it can take place if there is understanding on both sides. We at ICR are fortunate to have these three individuals who are there to offer wisdom and insight when major decisions are required to be made.

The Pros

We have a group of Partners invested in the success of the company. That is evident in energy that has been invested in continued corporate improvements and revenue growth of the company. I have had the opportunity to closely observe another out of province company that was sold to its employees about six years ago.

The new ownership group has increased sales from $6 million to over $10 million and in the meantime purchased the real estate that the business occupies. The founding Partners of ICR now have the benefit of watching the company they created grow and prosper while maintaining its original culture.

The Takeaway

An employee ownership purchase can be complex and challenging.  It requires emotional intelligence as well as a desire on both sides to make it work. If you are a business owner and considering the succession options available, I suggest you consider grooming employees who have a passion for the business and a desire to buy-in. I can say from firsthand experience, if it does work, it is a fruitful and rewarding experience.

Posted by Barry Stuart

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