Succession options
Four ways a business carries on when its owner stops.
A management buyout. An employee ownership trust. A sale to someone who will run it. Or closing it down. Most owners only look seriously at one of these, usually the one their accountant mentioned first, and usually later than they should have.
Here is what each actually involves — including the ones that are nothing to do with me.
| Management buyout | Employee ownership trust | Sale to an operator | Closing it | |
|---|---|---|---|---|
| Who ends up owning it | Your managers | A trust, for all staff | 75% the buyer, 25% you | Nobody |
| Who runs it | The same people | The same people | The buyer, or the team | — |
| Your staff | Stay | Stay | Usually stay | Redundant |
| When you get paid | Mostly over years | Mostly over years | Largely on completion | On winding up |
| Price | Modest | Independent valuation | Negotiated. Less at completion, a share of the upside | Asset value only |
| Takes | 6–12 months | 6–12 months | 4–6 months | 3–9 months |
| Main risk | Managers cannot fund or run it | Business cannot afford the payments | Choosing the wrong buyer, and a minority stake you cannot sell | You get the least of any option |
Timescales are typical rather than guaranteed. Tax figures below are for the 2026/27 UK tax year and change often — take advice from your own accountant before acting on any of it.
Option one: a management buyout
Your existing managers buy the company from you. In practice the business usually funds most of it — some cash at completion, a bank facility if the numbers support one, and the balance paid to you out of future profits over three to five years.
It is the most common succession route in engineering and construction, because the people who know how to run the business are already standing in it.
When it works. You have two or three managers who genuinely want it, who can price work and manage cash without you, and a business with enough headroom to service the payments while still investing.
Where it goes wrong. Wanting to own a business and being able to run one are different things, and the gap only shows after completion. The other trap is the money: most of your price is deferred, which makes you an unsecured creditor of a company you no longer control. If it struggles, you are both poorer and powerless.
Option two: an employee ownership trust
You sell a controlling interest to a trust that holds the shares for the benefit of all employees. The business keeps trading as it is, the staff collectively own it, and you are paid out of future profits — much like an MBO, but with everyone included rather than a management team.
The tax treatment was the main attraction and it has narrowed. Sales to an EOT were completely free of capital gains tax until 26 November 2025; since then relief is 50% of the gain, giving an effective rate of around 12% against 24% on an ordinary sale. Business Asset Disposal Relief cannot be claimed alongside it, and the conditions must hold for four years after the sale or the relief can be clawed back.
When it works. A stable, profitable business with a management layer that can run it, an owner who cares more about continuity than price, and the patience for a structure that takes months to set up and years to pay out.
Where it goes wrong. You will not get a premium price — the trust pays an independent valuation, not what a motivated buyer might offer. And because the payments come from future trading, a downturn two years in affects you directly. Employee ownership is a conviction, not a tax trick, and the Treasury has spent two Budgets making sure of it.
Option three: handing over to someone who will run it
Not a trade buyer absorbing you into their group, and not a fund preparing a resale. Somebody who takes a majority stake and operates the business — the same work, the same site, the same people, with a different person making the decisions.
This is what I do, so treat what follows accordingly. The structure I prefer is 75% and operational control to me, 25% retained by you, with the deferred part of your price secured against the company’s assets. You take less at completion than an outright sale would give you, in exchange for a quarter of what the business becomes. If you would rather have the money now, that can be structured instead — more cash, no retained stake, and I carry more of the financing.
When it works. The business can run without you for a fortnight. A buyer who understands the work rather than just the accounts. And a price built on what the business can actually carry, not a multiple pulled off a broker's website — how that number is reached is worth reading before you negotiate.
Where it goes wrong. You are trusting somebody. Once the shares transfer, promises about the site and the staff are worth exactly what the buyer's character is worth. Ask what else they have bought and what happened to it — and if the answer is nothing, ask what they have run.
Two specific things to insist on, whoever the buyer is. Get the deferred consideration secured — unsecured, it is the same trap as the MBO above. And get the exit on your retained stake written down, because a minority holding in a private company has no market and is worth what the majority shareholder decides it is worth.
The full structure, including the limits and what the retained 25% is genuinely worth, is on how a handover works.
Option four: closing it down
Two routes. A strike-off under form DS01 is the cheap one and suits a company with little left in it. A members’ voluntary liquidation is for a solvent company with assets to distribute: a licensed insolvency practitioner realises what is there and pays it out to shareholders as capital rather than income, which usually means Business Asset Disposal Relief applies — 18% on the first £1m of lifetime gains in 2026/27, against 24% at the higher rate.
Closing is sometimes exactly right. A business that only ever worked because of the person running it, in a market that is going away, with no management underneath — that business should be wound up cleanly while it is still solvent, and there is no shame in it.
What it costs you. You get the assets and nothing else. Forty years of customer relationships, a trading name people recognise, approvals and accreditations that took years, a trained workforce — none of it has a line in the liquidator's statement, and all of it has value to somebody still trading. There is more detail on closing or selling.
What usually decides it
Owners tend to think the decision is about price, or tax, or timing. In practice it is settled years earlier by how much of the business lives in one person’s head.
Three questions give you the answer honestly:
Could someone else price a job next week and get it right? If quoting is instinct rather than process, every option narrows, because what is for sale is largely you.
If you were off for a month, what would actually break? Not what would be harder — what would stop. That list is the work to do before any route is open.
Does anyone below you want it? If yes, an MBO or an EOT becomes real. If not, those two are off the table whatever the tax says.
A business that can run for a month without its owner has four options. One that cannot has one, and it is the cheapest one. The gap between those two positions is usually eighteen months of unglamorous work — writing down how things are done, and letting somebody else do them.
Next step
I am option three, and only sometimes the right one.
I buy owner-managed construction, engineering and manufacturing businesses in the UK and run them. I am a civil engineer and have spent thirty years in delivery — on site, running packages, then business units, most recently as a construction director.
If your managers want to buy it, do that instead. An MBO to people who have earned it is a better outcome than selling to a stranger, and I would tell you so. If employee ownership fits how you feel about the place, that is a good answer too.
I am worth a call when there is nobody inside who can buy it, no family who wants it, and the alternative is closing a business that still works.
Confidential either way. I will not contact your staff, your customers or your suppliers.