EOT: An Alternative Exit Route for Business Owners in the Events and Creative Industries

From Max Fellows, Founder of allpoints

For many creative business owners in the UK’s creative and events sectors, finding the right exit strategy can be complex. When mergers and acquisitions (M&A) aren’t an option—whether due to lack of a buyer, the nature of the business, tax impacts or a desire to retain control—an Employee Ownership Trust (EOT) can offer a compelling alternative.

Although they have been around for some time, EOT’s are still fairly unknown and not yet widely adopted. That being said, they are gaining traction for several reasons as they provide a tax-efficient way for owners to transition their businesses while protecting their legacy and empowering their teams. Recent examples like Brand Nation, 2LK and previously, First Event, demonstrate the potential of this model.

What Is an Employee Ownership Trust (EOT)?

An EOT allows owners to sell their business to a trust (made up of their SLT) set up for the benefit of their employees. Instead of seeking external buyers, the company’s shares are transferred into the trust.

• Owners can extract value from the business via its profits up to the point of sale in a tax-free transaction, provided it meets government criteria.
• Leadership teams and employees gain ownership of the business and share in its future success.
• This structure and the business’s valuation is backed by the UK government, ensuring fairness and transparency.

Crucially, EOTs allow owners to stay involved in the short- and longer-term business if desired, providing flexibility during and after the transition.

Examples of EOTs in Action

Though not yet common, some trailblazers in the events and creative industries have successfully transitioned to EOTs:

• Brand Nation: Mary Killingsworth, founder of this creative marketing agency, transitioned to an EOT just last week, taking advice from our team to ensure a smooth process.
• First Event: This events agency leveraged the EOT model to protect its independence and ensure long-term stability.
• 2LK Agency: Andy Sexton, partner and executive creative director of this global exhibitions and events agency, recently in 2024 embraced the EOT structure to position the business for sustained growth while rewarding its team.

These examples highlight how EOTs can provide a strategic solution when M&A isn’t viable.

Why Consider an EOT?

EOTs come with several advantages for agency owners:

1. Tax-Free Exit: Owners can sell their shares tax-free under current government rules, creating significant financial benefits.
2. Legacy Preservation: The business’s culture and ethos remain intact, managed by a leadership team that understands it best.
3. Employee Engagement: Employees gain a stake in the company, fostering a sense of ownership and motivation.
4. Business Continuity: Clients and partners benefit from stability, with no disruption to operations or values.
5. Flexibility for Owners: Owners can remain involved in the business or step back entirely, depending on their goals.

Challenges and Considerations

While the EOT model has clear advantages, it’s important to weigh the potential challenges:

• The EOT’s success depends greatly on the strength, dynamism and capabilities of the senior team (who are in effect taking control of the day-to-day running of the business). Without a solid team in place, any EOT would be extremely risky.
• Long-Term Holding Period: The trust is generally required to hold the shares for an extended period, which could impact future business transactions or acquisitions.
• Some Risk to Owners: The business must remain profitable to ensure the trust and employees can realise long-term value and payout agreements to the owner..
• Regulatory Changes: As EOTs become more popular, the government may revise tax benefits, potentially making the model less attractive in the future.

Why Now Is the Time to Act

With tax efficiencies and government support currently in place, EOTs are a highly attractive option for agency owners—but this could change as their popularity grows as well as the narrative of a new Labour government on business tax’s and rates. Acting now ensures you can take advantage of these benefits while they last.

At allpoints, we specialise in helping agency owners evaluate and execute EOT transitions, guiding you every step of the way. From assessing your readiness to structuring the trust and securing the future of your business, we’re here to help you make the most of this innovative opportunity.

Let’s talk about how an EOT could work for your agency—reach out today.