Robert-McMaster

CO-OPERATIVE ACQUISITION STRATEGY

Co-operative Acquisition Strategy

The number of “baby boomer” business owners wanting to retire and realise their assets by disposing of their businesses and selling properties is increasing. This could potentially put large numbers of people out of work.

Advice on how to transfer ownership to staff in the way of a workers co-operative through experience is not readily available or easily found in Australia.  Also, existing employee cooperatives can become successful through mergers and acquisitions 

Having recently transferred our 50-year-old family manufacturing business www.cmac.com.au to a workers’ co-operative so I could exit the business and retire, I discovered that co-operatives can potentially be the most socially responsible solution.

This was after a journey of nine (9) years exploring and trying different succession options.

All the below succession options were implemented and tried at C-Mac and the co-operative solution was the only one that got over the line in this economic environment where manufacturing has been struggling and re-inventing itself in

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IMPACT OF EMPLOYEE OWNERSHIP

Below is my summary from the “The Ownership Enquiry – Final Evidence Report” June 2018, which I thought a great introduction for anyone wanting to understand why I introduced employee ownership into our family business. Educating yourself before jumping into launching EO is critical to the success of your succession.

The evidence of the impact of employee ownership on performance is overwhelmingly positive. The most apparent evidence is for smaller firms, firms with larger employee ownership stakes, and in studies over longer time horizons.

Employee-owned firms tend to be more productive, have higher employee engagement, along with factors like rewards sharing, job satisfaction, organisational commitment, and motivation – which is reflected in higher retention and lower absenteeism.

Employee-owned business is more resilient in crises and appear to have a positive impact on the broader community. This evidence has salience in the current economic climate. The economy is increasingly shifting from manufacturing to services. The increasing shift involves the development of … Read more

FAMILY BUSINESS SUCCESSION

What do you do if you cannot find a successor or a buyer for your family business? Sell to your skilled and experienced workforce! “It’s an answer you may have been looking for.”

57% of family businesses have acknowledged that they would have no choice but to cease trading within one year of a severe illness or death of a current owner.

Only 42% have planned for the family business succession.

Family Business Succession Options

Model 1. “Recycling dad” but what if no one is willing or able to step into dad’s shoes?

Model 2. Next Generation ownership and management

Model 3. Have active next-generation owners with a non-family management team

Model 4. Trade Sale or find a private equity investor

Model 5. Management Buyout – Then the question arises; Can the business then sustain another MBO when the managers/owners are ready to retire?

Model 6. Employee Ownership

                6a. Create some liquidy with a minority employee ownership stake. This unlocks … Read more

WHY ARE THERE NOT MORE EMPLOYEE-OWNED BUSINESSES IN AUSTRALIA

After attending many business functions, seminars and conferences, I have found that business owners in Australia are unfamiliar with employee ownership. Even my accountant initially advised not to proceed with an employee-owned cooperative, due perhaps to a combination of inexperience and a warped perception that cooperatives were too tricky and complicated. He later told me “cooperatives were in his toolbox under dairy farmers”.
Our C-Mac experience has shown that:

  • The owner rarely thinks of selling to all the employees
  • Owners don’t consider that employee ownership represents another succession option
  • The owner does not consider that management and employees possess the requisite skills to run the business
  • Owners are concerned about losing control of their company
  • Accountants do not understand employee-owned companies
  • Most economists and professionals have limited knowledge or understanding of the benefits of employee ownership and don’t consider them as serious alternatives to conventional corporate structures
  • Management Buy-outs often receive priority consideration
    • Management is in the driver’s seat with
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