Fri, 30 Mar 2012 | By Carl Swansbury, director, Ryecroft Glenton Corporate Finance

The recruitment sector is the ultimate people business, so it is pivotal that each company does all it can to attract, retain and protect its key asset, particularly when planning for succession.  

Succession can take many forms. It can be a transfer of business to the next generation, a full or partial disposal to the management team, buy-in team or venture capitalist, or a disposal to a third party.

A strong, experienced management team not only underpins a staffing company’s continued performance following a change in ownership, but also ensures that the business is attractive to third party purchasers.

Management buyouts (MBOs) are a strategic option for business owners who would prefer their business to be retained by its existing management team. If a business has an experienced management team it not only means that its value and performance will be sustained rather than diluted with the owner’s exit, but also that the team could put in place a successful MBO.

MBOs see management teams taking full or part ownership of a firm, using their expertise to grow the business. The MBO process reduces risk because business continuity is better assured when the people who have managed it and know it well are its buyers.  

There are many ways in which to tie in high-performing recruiters and members of your management team to protect a company’s future. These include:

• An EMI (enterprise management incentive) share option scheme. By offering key members of the management team access to share options you not only incentivise them by confirming their involvement in the business’s overall success, but also focus their minds on achieving the company’s long term objectives.
• A clear concise development plan for each member of the management team. The individual approach provides staff of smaller firms with longer-term challenges, and for larger companies de-risks and retains highly skilled staff.
• Proposed extended notice periods at times of uncertainty.
• Communicating the company’s strategy for growth with all staff. The plan for growth requires buy-in from all employees to hit targets and promote a positive culture.

There is clear evidence within the staffing industry that early planning for succession and a focus on clear direction and communication to management and employees help business get into the best shape possible before a change in ownership.

By devising and documenting a succession plan, business owners are more likely to be in a position where they can maximise their return when they decide to exit the company.

Carl Swansbury, director, Ryecroft Glenton Corporate Finance