The notion that employees should be able to own their business is not new. There have been successful employee-owned firms for decades. But only in recent years has the idea of employee ownership become firmly established in the mainstream of the economy.

Private business owners, trade unions, management teams, public companies, the various levels of Government: all have encouraged or implemented employee buyouts over the past few years. Indeed, whenever a business is changing hands - whether this is because of an owner retiring, or a divestment, or privatisation or the realisation of an investment, the option of employee ownership is now being taken seriously. For it is recognised that, as well as spreading wealth and giving people a voice in their company's future, employee ownership makes profound commercial sense, entirely appropriate for the competitive market economy. The most successful businesses are those which fully involve their workforce and realise the potential and commitment of their employees at all levels.

Other factors have converged to make employee ownership the natural development of the future. The concept of broader share ownership in business companies (including those operating globally) is firmly established. A better trained and more flexible workforce now expects greater job satisfaction and increased involvement in decision-making. Profit sharing schemes are widespread and, supported by new legislation, "Employee Share Ownership Plans" (ESOPs) are growing in popularity. The form which employee ownership is taking is already showing many variations.

ESOPs are not only a plan to enable employees to own shares in their employers' business - they can also be an important financing vehicle for effecting an "employee buyout" of a company.

Employee buyouts, where the majority of employees own the majority (or in some cases 100%) of the company they work in, have not been as common so far in Australia as they have been in North America and Europe. However, from some examples in Australia, they can be an option where the primary motivation for selling the company is because the business no longer fits within the plans of the owner (particularly where the current owner wishes to retire). Where selling a company to it's employees is motivated by the desire of owners to remove themselves from the active management of their firms (and recoup their investment), such buyouts have a high degree of success - with virtually all remaining financially viable, and most remaining employee owned.

Some years ago (1996), a "How to" handbook - entitled "Employee Buyouts" - was published by accounting firm PricewaterhouseCoopers (with sponsorship and editorial support from the NSW Department of Fair Trading and the AEOA). The booklet - which is still available (in hard copy) and relevant - details a number of ways to structure employee buyouts. The booklet is available from the AEOA by contacting us with your name and address. The booklet contains two case studies and details all the steps for performing an employee buyout.

To be successful, employee buyouts, - like all firms - require sound management, adequate financing and a viable market for their products or services. Beyond that, employee-owned firms have two additional requirements: an effective, fair system for handling the mechanics of employee ownership (such a share valuation, procedures for selling or purchasing shares etc.) and a management culture which promotes communication and helps develop employee skills for participating in decision-making. Studies show that ESOP firms with employee participation are significantly more successful than conventional firms (or ESOPs!) without participation.

Employee buyout projects are welcome to contact the AEOA. While the AEOA does not itself provide business advice to such projects, it can provide you with a list of consultants who might be able to assist. It also has more general information, which can assist with the planning, development and implementation of "employee buyout" proposals.