Employee Buyout A Viable Exit For ‘Trapped’ Businessowners

C-Mac Industries is a locally grown and owned engineering plant in Girraween, Western Sydney. The company is enjoying an 18% increase in productivity after the employees took over as owners. C-Mac has defied the current trend in Australia to shut down when the owner retires.

SME Owners Don’t Know About ESOP Exit

More than 80% of Australian small and medium business owners aged over 55 are trapped in their businesses – struggling to work out how to escape and at the same time extract their wealth from the companies they have worked so hard to create.

What does ‘succession planning’ mean when, for example, businessowners in the manufacturing sector find themselves looking for a way to exit the business but the markets for their products/services are disappearing offshore?

A survey done by the big banks showed 38% knew nothing about the Employee Stock Ownership Plan (ESOP) as an option for keeping the business going and still retiring and a further 44% considered an employee buyout unlikely.

C-Mac’s ESOP

The Australian Employee Buyout Centre managed the ESOP implementation at C-MacIndustries and funded all the advisors’ costs. The funding was provided through a Federal Government Grant under the now completed Rudd government initiative, the Jobs That We Own program.

ESOP designer Craig West of Succession Plus says:

“This plan has been a great example of the combination of enthusiastic employees..and owners who can see the benefits of increased participation and who are prepared to create a win-win environment for all stakeholders. It is unusual to see such a high take up rate amongst employees and encouraging to see the improvements in performance even at this early stage.”

The New Scene At C-Mac

The ESOP involved the members electing two employees to represent them on the C-Mac board. One representative, Steve Grlyak, Manufacturing Manager for C-Mac said that:

“People are now saying ‘us’ instead of ‘me’ and asking, ‘what do you want us to do?’..

Job security is a key motivator at C-Mac and we do not want to lose employees with skills. There are now charts in the lunch room so everyone can see how the business is doing.

The change has been truly unbelievable from all staff. I have directions and targets from the elected board and I have all the support I need from all staff. Our meetings are open for discussion with great ideas from all staff to improve efficiency.

As a manager with job security and a share in the business it’s a great pleasure to manage a team who want you to lead with ideas”.

The company’s founding family are the principal shareholders but see the benefits of a gradual sale of shares to employees based on profit share as well as the increased involvement of key staff within the management team.

The plan – a Peak Performance Trust designed by Succession Plus specifically for small to medium privately held businesses who are looking to attract, retain and motivate key staff by involving them in both the equity and control aspects of succession planning – has been used successfully by a growing number of business owners throughout Australia looking for an innovative approach to succession planning.

For More Info

Following are some video links with all the details of the ESOP process for C-Mac.
1. Steve Grlyak tells his story about what employee ownership means in terms of their renewed job security and protection of workers’ skills.

2. The ‘job saving’ market and Craig West, the ESOP adviser to C-mac on some aspects of developing an ESOP.

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