Guest author Barry Horner, former CEO & Board Chair of Paradigm Norton, shares his experience of selling his business to an Employee Ownership Trust, and his perspective on why others are yet to discover what might be the right succession option for their business.
Lessons from EO firm Paradigm Norton
It is a perplexing reality in the modern business landscape that Employee Ownership (EO) isn’t just a feel-good concept, but rather it’s a strategic and compelling option for succession, culture, and long-term resilience.
Yet, for far too many business owners, the default exit ramps remain stubbornly limited to the worn-out paths of a trade sale or a management buyout (MBO). This isn’t just a missed opportunity, but in my opinion a blind spot in their vision. There’s a powerful alternative, and it’s time to pull it out of the shadows.
The knowledge gap. Why EO remains business’s best-kept secret (for now)
So, why aren’t more owners clued in? It’s not a conspiracy, but a systemic oversight.
- The default trap. The advisory world is still disproportionately wired for traditional exits. Many corporate advisors, even general legal and financial firms, simply lack genuine EO specialisation. If it’s not in their playbook, they won’t put it on a business owner’s table. Worse still, they are incentivised not to mention it as the professional fees for an EO are often less than an MBO or a trade sale. Just last week, a leading Southwest M&A agency explicitly stated, “we don’t like employee ownership” as a succession option. That’s the entrenched bias owners are up against.
- Perceived complexity. The intimidation factor. Employee ownership sounds heavy. Owners often assume it is a legal or financial labyrinth, or worse, that it means surrendering full control. The truth? Well-structured models like the Employee Ownership Trust (EOT) are designed for precision and control, not chaos. Paradigm Norton found the transition to EO to be a relatively straightforward transaction, guided by true legal experts in this field.
- Media silence. While gaining traction, EO still struggles to command the kind of headline-grabbing attention reserved for mega-acquisitions or IPOs. Its profound, systemic impact often plays out beneath the mainstream radar, a quiet revolution largely unreported.
- The quick cash mirage. Some owners are fixated solely on the immediate, biggest cash payout. They are, however, missing the entire forest for the trees, overlooking the often superior long-term, tax-efficient, and legacy-forging advantages that only EO can deliver.
- It isn’t all or nothing. The tax advantages kick in at 51% employee owned but many of the benefits that EO can bring would be evident if a smaller stake was employee owned.
When in March 2019 Paradigm Norton became 80% employee-owned, this wasn’t on a whim. Rather, it was a calculated strike to future-proof the business, lock down its unique culture, and cement its legacy. As we explored ownership succession, a key question was posed to the Board. “Is there a smarter way out?”
Lessons from Paradigm Norton. What we uncovered
Paradigm Norton’s founders didn’t stumble into an EOT. Our decision was a deliberate, strategic pivot, driven by an unyielding vision for our firm’s future. Our experience lays bare critical, hard-won lessons.
- Our core values were non-negotiable. For many founders, their business is far more than a balance sheet but rather it’s a living extension of their core values. Paradigm Norton chose EO precisely to safeguard our client-centric approach and collaborative ethos. We knew instinctively that a trade sale often amounts to a corporate soul-shredding and most often value destruction.
- Succession as a legacy. Not just an exit. EO forged a robust, internal succession model. Forget searching for an external suitor, transitioning our business to an EOT created beneficial ownership for all employees. This guarantees seamless continuity, embeds fierce loyalty, and secures the future for the next generation of leadership forged from within. For Paradigm Norton, it meant ironclad certainty for our team and our clients.
- Specialised expertise. Paradigm Norton’s transaction wasn’t a gamble, but rather it was a sale of 80% of our shares to an EOT with an up to a decade-long repayment strategy. This is not a DIY project. Our journey required us to appoint professional firms who undertook the intricate independent valuation, the complex tax implications, and the deferred consideration scheduling arrangements. Without this bespoke guidance, the entire process is somewhat of a minefield.
- Employee engagement. The ultimate performance multiplier. The true, enduring success of an EO firm flows from a deeply engaged workforce. Paradigm Norton grasped that genuine ownership ignites a profound mindset shift. When every employee’s (Who we now call a ‘Partner’) interest is fiercely aligned with the company’s success, it unleashes enhanced performance, sharper decision-making, and an unyielding collective resilience that traditional models simply can’t touch. The employees become the ultimate, unwavering custodians of the business’s destiny.
- A financial model built for the long haul. The EO model, when expertly crafted, isn’t just viable, it’s a financial powerhouse. The deferred consideration payment mechanism means the business retains capital for future growth and reinvestment, avoiding a massive upfront payment to sellers. This approach seeks to ensure the unwavering health of the business and its relentless ability to thrive for its new employee-owners.
The Paradigm Norton journey, like so many other EO triumphs, isn’t just a story, we believe it is a blueprint for an alternative, superior path. If preserving a hard-won legacy, empowering our most valuable asset (our team), and securing the indomitable future of a business are truly priorities, then it’s time to shatter the conventional thinking.
Employee Ownership isn’t just an emerging trend, but rather it’s a battle-tested model that, with the right specialist legal and financial firepower, can forge profound and lasting success for a business and its people.
Don’t be the owner who missed it!
This article is intended for informational purposes only and does not constitute legal, financial, or professional advice. Employee Ownership (EO) models, including Employee Ownership Trusts (EOTs), involve complex legal, tax, and valuation considerations. Business owners are strongly advised to seek competent, specialist advice before making any decisions or taking action.