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Executive Hire News › Archives › June 2016 › Special Profile: Eagle Plant : Preserving the Eagle culture

Special Profile: Eagle Plant : Preserving the Eagle culture

In a fascinating and compelling development, Somerset-based Eagle Plant has become an employee owned business, in a bid to ensure its future as an independent operation. Alan Guthrie reports.

As EHN reported in our last issue, the 13 April was an historic day for Eagle Plant, as it became an employee owned business. This model of ownership is reported to be gaining in popularity, with the number of companies following this path growing at a rate of 10% per annum, and accounting for GDP of £30 billion annually, according to the trade body, the Employee Ownership Association (EOA).

While such a move will not be appropriate for all businesses, many hirers could well empathise with the reasons behind Eagle Plant’s decision to adopt employee ownership. Principally, the hirer’s loyal 250-strong workforce are now co-owners via an employee Trust, enabling them to share in its success, influence the future operation and, above all, ensure its future as an independent business.

Michael Grimoldby, now the former owner and shareholder, who joined Eagle Plant in 1976, has taken a considerable length of time to evaluate the best option for the 26-depot business. “This arrangement preserves the culture of Eagle Plant, protects loyal staff and reassures customers. It would be more usual for shareholders to decide on a trade sale route, but, with all the uncertainty and broken promises that can result from such an outcome, that was not an attractive option, having built such a successful independent business.”

The original plant hire business was established in 1975 as an add-on to a building contractor in Chard, where Eagle Plant’s Head Office is still based. Eagle Plant became a separate limited company in 1981, and Michael was appointed MD in 1986. Following an MBO in April 1994, at which time the company had five depots, Michael and his late wife became the sole shareholders in the new business. He believes the timing could not have been better as the UK was emerging from recession, and, over the following years, more locations were gradually added through greenfield openings and acquisitions. In January 2015, its 26th site was opened in Bristol, joining a network stretching from Truro to Bury and across to west London. Annual turnover is now £29m.

“I would like to think that the businesses we took over have since been run with a consistent management culture that complemented their original standards. Individually, these acquired businesses would have been too small to interest institutional investors, but now, Eagle Plant would appeal to a predator. In my view, too many investors buy today, and sell tomorrow. Also, some owner-managers want ‘lifestyle businesses’, regularly taking money from their company. However, plant hire’s appetite for cash knows almost no bounds, and, if you want to maintain growth, you have to keep re-investing in the business.

Positive entrepreneurial attitude

“When selling a business, perhaps on retirement, many owners will approach their solicitor or accountant, but they are unlikely to have experience in this field. I first heard about employee ownership seven years ago, when I received a circular from Baker Tilly, an accountancy firm which had specialist knowledge of this approach. I was interested and I contacted them, not because I wanted to sell Eagle Plant at that time, but from a practical planning perspective. More recently, legislation was introduced by the previous Coalition Government to facilitate this sort of initiative through the introduction of tax reliefs from Capital Gains Tax for sellers and an income tax exempt bonus for employees. Eagle Plant eventually joined the EOA, who suggested that I seek specialist support from Co-ownership Solutions LLP, and I was impressed by their guidance and the positive entrepreneurial attitude of other EOA members. They wanted the best for their businesses, rather than extracting every last penny from them.”

The John Lewis Partnership is, undoubtedly, the best known example of employee ownership, after this family-owned business was gifted to an Employee Trust in 1929. In the cases of John Lewis Partnership and Eagle Plant, each employee benefits from a tax-free bonus derived from annual profits, allocated in an HMRC-approved way, such as a proportion of salary or based on accrued years of service.

Eagle Plant has tailored its arrangements to suit its particular requirements and aims. A 55% controlling stake in now held in Trust on behalf of the employees, and the Trust will pay for this over the next few years. In the meantime, Michael Grimoldby and the six other Directors will continue to run the business. In addition to receiving a general bonus, the intention is for employees to be able to buy shares. However, the Trust will always hold at least 50% of the shares, plus one share, to retain a controlling stake.

The Trust has five Trustees, with the Chairman, in particular, having considerable experience of working with national employee owned businesses. Two trustees are Eagle Plant Directors, while the others are employees who were originally co-opted to serve as part of the team formed to co-ordinate the transition. A ballot of employees will follow later this year to either re-appoint the co-opted employees, or replace them. All trustees have received specialist training for their new roles and responsibilities.

The Trust’s structure and functions are strictly defined in a Trust Deed. The trustees represent the interests of the employee owners, and have to be consulted on key issues such as acquisitions, remuneration, depots closures or redundancies. The Chairman has a casting vote. “To further protect the business, Eagle Plant could only be sold in future if there is deemed to be no plant hire market to serve,” said Michael Grimoldby. “The Trustees could sell the business, with 10% of the proceeds going to the employee owners, and the remaining 90% donated to charity. This is written into the Trust Deed.”

“The material gain for our employees is the tax-free bonus, as well as any dividends if they are shareholders. However, the other benefit is that the business culture, which recognises the staff as valued individuals, will be preserved.”

Michael Grimoldby retains 45% of the shares, which could be transferred to family members or sold to the Trust in the future. “As I have now relinquished ownership, I could theoretically leave at any time. However, I have no intention of doing so, and will continue to serve as MD. Nevertheless, the new agreement ensures that, if I were to fall under the proverbial bus, there would be no doubt about Eagle Plant’s future direction. If there were any uncertainty, the Trust will protect the employees.

“I don’t want to put any kind of veneer on this, and, one of the reasons I contacted EHN, was to tell the industry what has happened in a straightforward way, and to provide information about the employee ownership concept, which is now a reality for Eagle Plant and its staff.

“We produced regular newsletters to inform staff about the transition and there was obviously some scepticism, but, through involving two employees in the buyout process and regular communication with all staff, everyone seems to have bought into the idea. In the past, staff could always contact me personally if they had ideas or concerns. However, that culture will continue, as they engage with other employees. People don’t have to apologise to make suggestions or voice opinions, and this will remain part of our business ethos.

“The more our staff understand employee ownership, the more they appreciate it and engage with it. Many have worked for companies that have been taken over in the past and have seen what can happen under new management. This way, it is business as usual, and will remain so. The Directors remain in post, which reassures customers. And things will get even better for the staff. As a group of people, they are great, taking pride in their work, and are a credit to our business and the industry they serve.” •

www.eagleplant.co.uk

     
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