Galloway & MacLeod

Galloway & MacLeod, Grain Millers and Agricultural Merchants has served the rural community since 1872. In 2010 with no obvious succession, the family considered the exit options, including a MBO. Inspired by a Co-operative Development Scotland (CDS) business succession event recommended to him by his Scottish Enterprise account manager, Managing Director Ralph MacLeod considered selling the business to the employees.

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Co-operative Development Scotland is the arm of Scottish Enterprise working in partnership with Highlands and Islands Enterprise that supports company growth through collaborative and employee ownership business models.

For more information or advice on employee ownership, email info@cdscotland.co.uk or call us on 0141 951 3055. Follow us on Twitter @cdscotland

Co-operative Development Scotland27 Causeyside Street Paisley PA1 1UL www.cdscotland.co.uk

Scottish EnterpriseAtrium Court 50 Waterloo Street Glasgow G2 6HQ www.scottish-enterprise.comSE/3984/Mar14

Ralph MacLeod, Chairman, Galloway & MacLeod Ltd

“The issue of succession for each new generation of a family business is gone. Personal development and progression is entirely on merit, all staff are accountable and performance measured. The employees now have a real stake in the business while being masters of their own destiny. There is an independent spirit and a mind-set of ‘can-do’.”

MAIN BUSINESSGrain millers and agricultural merchants

ANNUAL TURNOVER£15m

NUMBER OF EMPLOYEES34

THE CHALLENGE

The agricultural supplies sector is fiercely competitive, dominated by large international organisations. Acquisition by a competitor or merger with another firm could have been easily achieved but would have resulted in rationalisation and job losses. The company has strong roots in the local community and is an important employer in the area. Moreover, there was a young, talented management team in place and a desire to keep the business local. A takeover or merger was unlikely to achieve this.

They also wanted to ensure continuity and to secure the business for the long term. An exit was sought that would allow Galloway & MacLeod to benefit from a phased family exit and would work for both the individuals within the business and the corporate entity. The desired solution would deliver acceptable value for the family, and a tax efficient investment for the employees.

THE SOLUTION

Internal consultations with key staff and a feasibility study funded by CDS concluded that the business objectives would be best met via an employee ownership structure. A proposal was formally tabled which was unanimously accepted. With further support from Baxendale, the company became employee-owned in December 2010. Employee ownership provided an exit route which met the family’s objectives, and provided the company with a stable platform for growth.

DEAL STRUCTURE & OWNERSHIP

The company opted to implement a hybrid ownership model combining trust and individual shareholding. An Employee Benefit Trust (EBT) was set up to buy shares from the MacLeod family using company profits. The deal was set up over 15 years with the vendor’s investment protected by an option agreement. Ultimately the EBT will own a controlling share with the balance of shares being available to employees via a tax effective Share Incentive Plan (SIP). Initial take up of the share scheme was around 25% but within three years 90% of employees had bought shares.

GOVERNANCE & EMPLOYEE ENGAGEMENT

Ralph MacLeod became chairman on announcement of the deal and the former Sales Manager Donald Harvey was appointed Managing Director. Trustees are responsible to the employees to ensure the business operates in compliance with the Scheme Rules and maintains the ethos of the founding family. There are three trustees; an employee trustee, an external, professional trustee (a solicitor) and Ralph MacLeod. Trustee meetings are held twice a year.

THE IMPACT

The transition was smooth with no interruption to the day to day operations of the business. Decisions continue to be made for the long term. The business is growing locally and nationally. Good staff retention and quality recruitment provide a firm platform for expansion. To date, sales and the share price have made good progress. The business has an ambitious and sustainable growth plan and most importantly continues to prosper while maintaining a strong ethos of integrity, personal development and social responsibility.

Galloway & MacLeod Ltd King Street Stonehouse South Lanarkshire Scotland ML9 3EH

Tel: +44 1698 791919Fax: +44 1698 792710www.galloway- macleod.co.uk

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