Why Employee Ownership is the Ultimate Growth Strategy for Accountancy Firms
Geldards is a leading authority on Employee Ownership Trusts, having advised numerous businesses on becoming employee owned, while supporting and advising employees throughout the process. Andrew Evans (Tax Partner) and Debra Martin (Corporate Partner) take a look at the challenges facing Audit and Accountancy Practices and when it becomes appropriate to consider moving to an EOT structure.
Why Employee Ownership is the Ultimate Growth Strategy for Accountancy Firms
Succession planning has become one of the most pressing challenges facing mid‑tier and smaller audit and accountancy practices. Many firms acknowledge the issue but postpone dealing with it, often until the problem becomes unavoidable. The risk in doing so is not limited to retiring partners; firms with no clear succession plan can find themselves losing key staff and clients who are uncertain about the long‑term future of the practice.
At the same time, the professional services market is experiencing increasing consolidation. Private equity‑backed groups and trade buyers are acquiring practices at pace, placing further pressure on independent firms and making it harder to retain and attract talented individuals who value culture, autonomy and stability.
The consolidation dilemma
For some firms, selling to a consolidator may appear to offer a clean exit. However, this route can raise difficult questions about independence, professional culture, and the future of long‑standing client relationships. Many partners are uncomfortable with the idea of “selling” the firm, its clients or its people, particularly where those relationships have been built up over decades.
Employee ownership offers an alternative approach — one that allows founders and senior partners to plan an orderly exit while preserving the identity and independence of the practice.
Operating like a corporate — without being one
In reality, many modern partnerships and LLPs already operate much like corporates. Strategic decisions are typically taken by a small executive group rather than by genuine collective decision‑making. The need for a clear executive voice is well understood; firms simply cannot function effectively with too many decision‑makers.
If a practice already operates as a corporate in all but name, employee ownership through a company structure can feel like a natural evolution rather than a radical departure.
An alternative to management buy‑outs
Traditionally, succession has often been addressed through management buy‑outs, with one or two individuals stepping up to acquire the business. In practice, this can be difficult to achieve. Suitable candidates may not exist, or they may be unwilling or unable to commit the required capital at an early stage of their careers.
Employee ownership widens the pool. Rather than asking a small number of individuals to buy the business, ownership can pass to employees collectively, typically via an Employee Ownership Trust (EOT). The firm continues to be run by its existing leadership, but for the benefit of all employees.
How employee ownership works in practice
Under an EOT structure, the company acquires a controlling interest in the business on behalf of the employees. The purchase price is typically funded over time out of future profits, meaning sellers are paid gradually rather than upfront. This does require patience on the part of the exiting partners, but it avoids the disruption and cultural shock that can accompany third‑party sales.
Importantly, the transition can be structured so that there is no disruption to client services or to the people delivering them.
Regulatory acceptance for audit practices
Historically, some audit practices have been cautious about employee ownership due to regulatory uncertainty. That position has shifted. Professional institutes now recognise that audit practices can be controlled by an employee ownership trust, provided those in control meet the relevant audit qualification requirements. This development removes a significant barrier that previously limited take‑up within the audit sector.
Supporting talent and fair progression
One of the most compelling advantages of employee ownership is its impact on people. Promotions no longer depend on an individual’s ability or willingness to invest capital in the business. Instead, progression can be based on merit, performance and leadership potential.
This can significantly improve retention and morale, particularly among younger professionals who may feel excluded from traditional equity models but are keen to share in the long‑term success of the firm.
Releasing value while protecting independence
Employee ownership offers a way for founders and senior partners to realise value in the business they have built, without compromising its independence or ethos. It allows partners to step back gradually, reassuring clients and staff that there is a clear and credible plan for the future.
For many professionals, there is something intrinsically rewarding about knowing that the firm’s legacy will be carried forward by the people who work within it, rather than being absorbed into a larger group.
Is employee ownership right for your practice?
Employee ownership will not suit every firm. It requires careful planning, realistic expectations around payment timelines, and a willingness to think differently about ownership and control. However, for audit and accountancy practices grappling with succession, talent retention and consolidation pressures, it represents an option that deserves serious consideration.
The key is to start the conversation early — while there is time to explore the structure properly and to decide whether employee ownership aligns with the firm’s values and long‑term objectives.
If you are considering Employee Ownership, please contact Andrew Evans andrew.evans@geldards.com or Debra Martin debra.martin@geldards.com at Geldards to discuss further.