Getting the most out of Acquisitions

Getting the most out of Acquisitions

Today’s corporate transactions are increasingly seeing vendor shareholders taking an active role in the acquirer post completion and, as a result, the entrepreneurial vendor is looking for ways to maximise his commitment in the new entity. As more and more acquirers are recognising that the best way to continue to drive growth in the business being acquired is to incentivise these entrepreneurs, who have already made a successful job of growing their business, with a share of the action.

Current strategy to achieve this is commonly by means of a Joint Share Ownership Plan (JSOP) arrangement whereby the company and the employee own separate interests in the same share. Typically, the company retains the right to the current value of the share and the employee gets the upside (with or without a hurdle). Alternatively, another way to achieve this would be through the issue of growth shares with a similar outcome.

So is this the new big thing for entrepreneurs who are locked into the businesses in order to deliver the future growth that the acquirer anticipates? The concept of JSOP itself is not new and although growth shares in the past were perhaps in the background due to the perception that HMRC did not seem to like them, this was more to do with the difficulty of placing a value on the shares themselves at the time they were awarded rather than the concept.

If you have any questions about this or would like to know more, please don’t hesitate to contact us.