Comparing EOTs to Other Exit Strategies
- EOT.co.uk
- Aug 14
- 3 min read
Exploring your options
When it comes to stepping away from your business, there’s no one-size-fits-all approach. Whether you’re planning for retirement, reducing day-to-day involvement, or simply looking to de-risk, choosing the right exit strategy can have a profound impact on your finances, your team, and your legacy.
One increasingly popular route for UK business owners is the Employee Ownership Trust (EOT) — a government-backed model that allows you to sell a controlling interest in your company to your employees, typically tax-free.
But how does the EOT model compare to other common exit options?
Trade sale
Selling your business to a competitor, supplier, customer, or private investor is the most traditional exit route.
Pros
Potential for a high valuation if there’s strategic buyer interest
Clean break possible
Often includes cash up front
Cons
Highly competitive process
Risk of redundancies or culture change post-sale
Due diligence and negotiations can be intense
Buyers may seek to reduce price late in the process
Compared to EOTs: EOTs generally offer a smoother process and protect your team and culture — but trade sales can deliver a higher sale price, especially if competitive tension is created.
Private equity (PE) or growth capital
Selling a majority or minority stake to an investor, with a view to scaling the business or exiting fully in a few years.
Pros
Retain some equity for a future sale
Professionalise and scale the business
PE firms bring experience and connections
Cons
Not a true exit — you're still involved
Cultural shift and new performance expectations
Can be time-consuming and expensive to set up
Compared to EOTs: EOTs are more focused on succession and legacy, whereas PE is about growth and return. If your goal is to reduce risk while continuing to lead, both may be worth considering.
Management buyout (MBO)
Sell the business to your existing management team, often with third-party funding support.
Pros
Continuity for staff, clients, and suppliers
Rewards loyal team members
Confidential and relationship-driven
Cons
Management may lack the funds or risk appetite
Deal structure can be complex
Personal guarantees may be required
Compared to EOTs: EOTs offer broader staff ownership and don’t require individual team members to raise capital or take on personal debt. They can be seen as a more inclusive alternative to a traditional MBO.
Employee Ownership Trust (EOT)
A government-supported structure that enables business owners to sell a majority stake (51% or more) to an employee-owned trust, funded by company profits.
Pros
0% Capital Gains Tax on qualifying transactions
Preserve the business culture and values
No need to find an external buyer
Staff engagement and retention often improve
Can be structured around a gradual or full-time exit
Cons
Sale price is based on fair market value — no premium
Relies on future company profits to fund buyout
Owners need to support the transition
EOTs are particularly well suited to owners who prioritise people, purpose, and legacy over maximum price. For the right business, they provide a generous tax advantage and a practical, people-first exit.
What’s right for you?
Each exit strategy comes with trade-offs. The best choice depends on your goals:
Do you want the highest possible price, or the most stable succession?
Are you seeking a clean break, or a gradual transition?
Do you want to reward staff, or find a strategic buyer to scale the business?
If preserving your business culture, looking after your team, and securing a fair, tax-efficient exit appeals to you, then the EOT model could be worth exploring.
Talk to the EOT specialists
At EOT.co.uk, we work with UK business owners to explore whether employee ownership is the right path — and if it is, we guide you through every stage of the transition.
Whether you’re comparing your options or want a detailed feasibility report, our team can help you understand the pros and cons in your specific situation.
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