EOTs vs Trade Sales: Which Exit Strategy Maximises Value for Your UK SME?

For UK SME owners planning an exit, choosing the right strategy is crucial to maximising business value and ensuring a smooth transition. Two of the most common options are Trade Sales and Employee Ownership Trusts (EOTs). While both have advantages, a Trade Sale often provides higher valuations, greater financial rewards, and a faster route to exit.

In this article, we compare Trade Sales with EOTs, exploring which strategy delivers the best value for your business and discussing alternative exit routes.

Understanding Trade Sales

A Trade Sale involves selling your business to another company—typically an industry competitor, supplier, or investor looking to expand through acquisition. This strategy is particularly attractive to business owners seeking to maximise financial returns and unlock synergies with a strategic buyer.

Why Trade Sales Often Maximise Value

• Higher Sale Price – Strategic buyers may pay a premium for synergies, customer base, or intellectual property.

• Immediate Financial Gain – Owners can secure a full exit with an upfront cash payment or structured earn-out.

• Access to Greater Resources – A buyer with financial strength can invest in growth, securing long-term business success.

• Competitive Bidding – A well-managed sale process can attract multiple offers, driving up valuation.

Potential Challenges of a Trade Sale

• Loss of Legacy – A trade buyer may integrate the business, rebrand, or restructure operations.

• Employee Concerns – Cultural changes or redundancies may impact staff morale.

• Longer Due Diligence Process – Buyers conduct rigorous financial and operational assessments.

Employee Ownership Trusts (EOTs): A Different Approach

An Employee Ownership Trust (EOT) allows owners to sell their business to employees via a trust structure, enabling staff to collectively take over operations. This model prioritises continuity and employee engagement but may not always deliver the highest valuation.

Benefits of an EOT

• Preserves Company Culture – Employees retain control, ensuring stability.✔

• Tax Incentives – UK government incentives include capital gains tax (CGT) exemptions for sellers.

• Gradual Exit – Owners can step back over time while maintaining some involvement.

Challenges of an EOT

• Lower Valuation – Sale price is usually limited to fair market value, without competitive bidding.

• Deferred Payments – Owners may not receive full payment upfront, as the business funds the buyout over time.

• Ongoing Business Risk – If the company struggles post-sale, deferred payments may be at risk.

Trade Sale vs EOT: Which is Right for You?

Factor	Trade Sale	Employee Ownership Trust (EOT)
Financial Return	High – Potential premium from strategic buyers	Fair – Limited to market value
Payment Structure	Upfront or staged payments	Deferred, paid over time
Control & Legacy	Lost – Buyer dictates future direction	Retained – Employees control operations
Tax Benefits	Standard CGT rules apply	CGT exemption available
Employee Impact	Uncertain – Potential restructuring	Positive – Job security & engagement
Speed of Exit	Varies – Depends on deal complexity	Gradual transition

For business owners prioritising maximum financial return and a clean exit, a Trade Sale is often the superior choice. However, those who value long-term employee ownership, continuity, and tax efficiency may prefer an EOT.

Other Exit Strategies to Consider

Beyond Trade Sales and EOTs, UK SME owners have other options, including:

• Private Equity Sale – Selling a stake to an investor who provides capital and expertise.

• Management Buyout (MBO) – Selling the business to the existing management team.

• Stock Market Listing (IPO) – Floating the company to raise capital and expand.

• Passing to Family – Transferring ownership to a successor within the family.

Each route has pros and cons depending on your financial goals, business model, and legacy ambitions.

Choosing the right exit strategy depends on your financial objectives, business structure, and long-term vision. While an EOT preserves company culture, a Trade Sale is often the best route for maximising business valuation and securing a strong financial return.

Considering selling your business? Our expert M&A advisors can help you evaluate your options and secure the best deal. Get in touch today for tailored exit strategy advice.