Employee-ownership fund Valloop is raising £250m to back employees buying out owners who want to retire and exit from businesses.
Valloop wants to share ownership of SMEs valued anywhere between £1m and £15m.
Business buyouts by staff are a rising trend, giving retiring owners a way out without having to sell to a rival or an overseas owner.
They also keep businesses as a going concern, keeping jobs local and spreading wealth among employees.
Employee-owned businesses in Britain are currently worth £20.1bn between them, employing 178,000 people.
Famous employee-owned businesses include John Lewis and, most recently, Richer Sounds, which was taken over by its employees in May last year.
Valloop – which stands for “value loop” – is the brainchild of co-founder and CEO Stephen Greenwood, who has been involved in SME ownership space for the past 30 years, working for Equifax and BNP Paribas and as an independent adviser on management buyouts (MBOs).
However, the MBO market collapsed after the financial crisis of 2008 when banks stopped lending money for management buyouts and then equity investor 3i – the forerunner to today’s BGF – withdraw from investing in SMEs to concentrate on mid-sized companies.
|Top 10 UK employee-owned companies|
|Rank||Company||Activity||EO%||Revenue £ (m)||Employees|
|1||John Lewis Partnership plc||Retail||100||10317||83700|
|2||Mott MacDonald Group Ltd||Engineering consultancy||100||1784||15297|
|3||Arup Group Ltd||Design and engineering||100||1715||14840|
|4||Greenwich Leisure Ltd||Leisure facilities management||100||299||10593|
|5||Unipart Group of Companies Ltd||Logistics||52||715||5429|
|6||Hyperion Insurance Group Ltd||Insurance brokers||45||696||4996|
|7||Shaw Healthcare (Group) Ltd||Community care||51||100||3217|
|8||PA Consulting Group Ltd||Management consultants||47||568||3121|
|9||Control Risk Group Holdings Ltd||Risk management||100||238||2965|
|10||City Health Care Partnership CIC||Community health||100||123||2571|
Greenwood launched Valloop in 2015 as a five-year pilot, raising money through wealth managers and financial advisers who were looking for a socially conscious fund.
The pilot phase raised £10m and has, so far, invested £7m of it in businesses with a value of £25m today.
If the £250m raise is successful, Valloop plans to invest in 250 small businesses around the UK, creating approximately 10,000 employee-owners.
Currently, 370 UK companies are categorised as employee-ownership SME businesses, 61 per cent have changed ownership in just the past five years.
Valloop estimates that 7m European SMEs worth a combined £24tr will change hands over the next decade as founders step back.
Greenwood said: “There’s an enormous social purpose here, creating democratic ownership for all employees. Keeping the business and productivity in the region while protecting the jobs while giving the retiring owner another option rather than selling to a competitor or an overseas buyer.”
Greenwood believes that Valloop offers both investors a strong return while doing social good and also boosts businesses as data shows employee-ownership firms have lower absenteeism, greater focus on the bottom line.
Its blended financial product, which combines debt, equity, asset finance and mortgages, offers investors a compound return of 15.5 per cent.
Greenwood said: “You get growth when you engage with staff; there’s less absenteeism, they’re more cost-conscious and the outside world sees employee-ownership businesses as more ethical.
“Our core focus is on the owner who’s looking to retire and exit and for an SME that’s looking for growth capital. Either is fine. But we must share the same values. It’s important that the owner likes the legacy outcome of the employee-ownership model rather than leave the business to a competitor.”
Deb Oxley, CEO of the Employee Ownership Association, has described Valloop as “an antidote to inequality” helping people to reverse poverty.
Greenwood said: “It’s time for change. What’s just happened in the world since Covid is that employee ownership has become more relevant. We all want to build back better and this is a contributory factor to make a positive difference.”