If you are a business owner, it is likely that you will one day face an exit option dilemma. The prospect of selling your business and leaving behind everything you have worked so hard to achieve can feel emotionally challenging. To make the right decision for your company, you should consider the different ways available to you in order to realise the value of your many years at the business.
Two of these exit options include a trade sale and transitioning to an employee ownership trust (EOT). Both have pros and cons that need to be considered before taking that next step. The exit strategy you choose will determine your company’s future, so ensure you are truly planning for business continuity.
Exit Option: Trade Sale
A trade sale is when you dispose of your business, usually in its entirety, to another company. The acquiring company could be a direct competitor or work in a complementary sector. It could also be either UK-based or a global business.
With the current economic condition, vendors may be surprised to hear of the substantial appetite from acquirers on both a local and international scale. However, insufficient deal opportunities can also result in a price war for the best-positioned companies.
Pros of Trade Sale
- You are likely to achieve a premium on price, partly due to the synergies a trade buyer can achieve.
- You are very likely to obtain your money, or a significant portion of it, at completion or shortly afterwards.
- Business owners have a higher likelihood of walking away quicker from the business than with any other kind of sale process or exit option.
- You will only pay 10% tax on the first £1m.
Cons of Trade Sale
- If you haven’t selected your buyer with great consideration, there could be a cultural mismatch. This could result in talent loss and ultimately a less cohesive exit strategy.
- You may feel that a possible loss of brand is unacceptable.
- On average, it can take from nine to twelve months to complete a transaction.
Exit Option: Employee Ownership Trust (EOT)
Whilst this process of business exit has been accessible since 2014, employee ownership trusts are not as commonly known. However, the number of EOTs has grown in recent years. As of 2025, there are approximately 2,250 companies in the UK that have undergone an EOT. This exit strategy has expanded in popularity due to the significant benefits it offers the business owner, the company, and its employees.
The principle of an EOT is that the owner transfers some or all of their business to a trust, which then owns the business on behalf of all the employees.
Pros of an Employee Ownership Trust
- The staff values and integrity of the business are maintained as there is no change of guard.
- There is zero tax payable on the consideration you take, as long as you don’t extend the tranche transfer beyond one tax year.
- The staff who have helped you build your business become owners for no cost to themselves.
- It can attract great talent and retain the talent you have, making it an exit strategy that values the importance of the workforce.
Cons of an Employee Ownership Trust
- The vendor is no longer a controlling shareholder
- The value is likely less than a trade sale, as it is difficult to argue synergies that a trade buyer can achieve.
- Unless the trust is willing to borrow to pay the vendor down immediately, you will have to wait for your cash to be paid out of profits.
Conclusion
A trade sale and an EOT both offer distinct advantages as exit strategies. Ultimately, the choice between these two exit options is dependent on the goals of the business owner and the context under which the company operates. To ascertain the most suitable path, business owners should consider enlisting the help of advisors who can help them understand why a certain exit option may be more appropriate. Click here to discuss this further with a member of the team.