Case study

Industrial Doors Company

Background

The owner of Industrial Doors Company was approaching retirement when he attended a seminar run by Nottinghamshire Co-operative Development Agency. He had no obvious successor for his company and could not place the company on the open market without alerting customers and thereby losing their confidence.

The options

At first sight there did not appear to be any options open to the owner - his relations with a highly skilled management team were distant, although they were long serving and he had no idea how to broach the subject of the future. Similarly the employees, who had observed for themselves the
owner's deteriorating health, advancing years and lack of a family successor had no channel of communication. The CDA was able to open up dialogue between the two parties.

The process

The CDA spent a lot of time with the owner, explaining the process and re-assuring him that this was a way forward. Once he was on board and willing to proceed the CDA had a similar job convincing the employees. It is often the case that employees have reservations about undertaking a buyout: doubts about their own abilities, suspicions about the true motivations of the owners or a lack of trust in their fellow workers can all play a part in discouraging employees to proceed. Usually the only way to overcome these doubts is to proceed step by step and prove those doubts wrong, whilst at the same time building employees confidence in themselves and the business they are buying. Team building and trust are theories made real once people start working on a project with a common goal. This was certainly true of Industrial Doors Company.

The raising of the finance

Three of the four employees were prepared to invest in the company. Despite everyone s best efforts, the fourth member of staff would not join the co-operative. This ultimately affected the legal structure that was adopted - they registered as a company limited by shares rather than using the more tax efficient Employee Share Ownership Plan. The remaining buyout price was raised in the form of loans from the Industrial Common Ownership Finance, Nottinghamshire CDA's loan fund and the bank.

After the conversion

The buyout was concluded within six months of the employees meeting the CDA for the first time and has been trading for just over a year. one of the workers commented, We have no regrets. Trade is up, profitability is up and equally importantly staff morale and commitment has never been higher. It has not been all plain sailing though, with the main difficulties surrounding employing new people, which was something the previous owner had always undertaken. However, you certainly learn by doing and at least we can confirm, whereas I know [the owner] felt very lonely and isolated as the sole decision maker.