Kingfisher (Lubrication) Limited is a manufacturing business from West Yorkshire that is unashamedly proud of its engineering heritage. They were founded in 1867 and have been manufacturing grease fittings on the same site in Leeds for decades. On the 9th of January 2020, Kingfisher changed ownership. After being owned by the Fisher family, who founded the business, for generations, they became an employee owned business. 100% of the voting shares in the company are now owned by an Employee Ownership Trust, for the benefit of Kingfisher employees.
Kingfisher’s history as a family business is evident; current Managing Director John Fisher has been working in the business for most of his working life and in the board room are photos of his Father, Grand-uncle and his Great Grandfather, all of whom were owners and managing directors in the business. John himself explained that he had only ever felt like a custodian of the business his family built. His priority, when considering his own succession, was to secure the future of the business for the current and future employees.
Protecting the independence of the business was a vital part of this equation. In addition, John’s aim was to ensure that the business remained as a manufacturing business, continuing to manufacture high quality products, according to its principles, at its home in Leeds. This included supporting programmes like the company’s engineering apprentice training and offering opportunities and careers in engineering for all its employees.
The solution that John and the Kingfisher Board found was employee ownership. Using an Employee Ownership Trust they would be able to transfer the family owned shares into a trust for the benefit of current and future employees. The ownership of the company would be passed to those who most closely shared their priorities for the business; the employees. Future succession would be secured and any potential asset stripping trade sale or similar transaction off the table. John would able to control the future of the family business in a way that would not be possible in a trade sale, securing its future as a UK manufacturing business and respecting the legacy of generations of his family.
Discussions with local businesses that were also employee owned gave valuable insights into how the structures could work. However, it took a few months for John and Kingfisher to find the right advisers to help them with the unique aspects of their transition; in particular the need to safeguard their manufacturing legacy and significant asset base within the business. Baxendale’s twenty years of experience working with businesses like Kingfisher made us a good fit and we were engaged to advise on the project.
Four months after the initial discussion with Baxendale, Kingfisher were able to celebrate their move into employee ownership with their new employee owners. Not only were we able to advise them on how to structure their new employee owned company, we could also provide them with expert advice on all the options available to them. This led to a number of key design features in Kingfisher’s structure, including:
- The current and next generation of the Fisher family can remain involved with the Employee Trust for many years to come (they can’t control the trust, but can be represented there).
- A number of safeguards were created around the manufacturing focus of the business and its property assets.
- There would never be a financial incentive to sell the business – in such a case the proceeds would be distributed to charities.
As well as undertaking all the necessary legal work, Baxendale ran a session with all employees, explaining about employee ownership and answering their questions. We also undertook bespoke training for the future Trustee Directors to ensure they fully understood their role and responsibilities and were comfortable with the details of the purchase of the company by the trust.
John Fisher had this to say about the transition:
“Once the principle of an Employee Ownership Trust had been understood by myself and the Board, which did take several months prior to engaging Baxendale, the process of transitioning to an EOT was very smooth. The support of several family members, who had inherited their shares but took no active part in running the business, was key to this transition and their 100% support and encouragement helped enormously in deciding that setting this course was the right route to take. I cannot speak highly enough of Baxendale’s professional approach to this sometimes-complicated process. Baxendale were superb at establishing where our principles lay, what was practical and what not, and most importantly being 100% behind the company with their open, honest and focused approach to the matters at hand. They structured the legal documentation around these sometimes quite vague issues with such professionalism that I cannot speak highly enough of them. The relief I now feel having completed this process is enormous and I can now look forward to a happy and relatively burden free retirement.”
Employee Ownership can represent a uniquely good fit for family businesses. To read more on how this might work, you can read our article here.
Baxendale Employee Ownership are specialist advisers on employee ownership in all its forms, including Employee Ownership Trusts (EOT), direct share ownership and employee share schemes. We have been advising on employee ownership for twenty years and have helped more than 250 companies transition into employee ownership. At Baxendale we work closely with transitioning businesses to understand the best approach for them, from all the options available. We understand that successful employee ownership goes beyond the legal documents and offer comprehensive support with communication and training, to ensure everyone understands the changes that are taking place.