Demolition specialist John F Hunt Group has announced its sale to an employee-ownership trust (EOT).
Equity in 19 of the group’s 21 companies is to be transferred to the new trust. Morris Machinery and generator supplier John F Hunt Power are excluded from the deal.
Financial details of the transaction have not been disclosed. The group had a book value (net assets) of £38.7m as of 31 March 2023, the end of the period covered in its latest published accounts.
Under EOT rules, shareholders pay no capital gains tax on money received from a sale and trusts hold shares on behalf of employees. It can pay each of them an income-tax-free bonus of up to £3,600 from its annual profits.
Essex-headquartered John F Hunt was founded in 1982 by current chairman John Hall. The firm now employs more than 500 people.
Dozens of construction firms have turned to the EOT model in recent years, often when bosses are planning for retirement and want to sell to people they know.
In a statement, Hall said he would remain “active chairman” and that “nothing will actually change in the day-to-day management of the group”.
He added: “Selling the group to a third party or breaking it up would never have been straightforward, or an option I would have considered.
“Our employees are the mainstay of the business, and it has taken a long time to create a group of companies that works so well together.
“Transitioning to employee ownership was the next natural step and I’m delighted that all the directors and staff have bought into the idea and been so supportive.”
Several well-known contractors that have adopted the EOT model have gone out of business in the past two years, including Michael J Lonsdale, Buckingham Group and Readie Construction.
In May, Construction News examined whether the costs of becoming an EOT had contributed to their financial troubles.
Trusts usually pay an initial sum to the former owners for their share, then pay off the remainder of the valuation in subsequent years. The combined costs of the payments for Michael J Lonsdale, Buckingham Group and Readie Construction far outstripped their combined bottom line in the years after their sales.
Hall said: “EOTs are now a ‘well-trodden and accepted path’ in continuing the success and growth of a business but the secret has to be maintaining the strength of the balance sheet and not to be greedy.”
BDO tax partner Matthew Emms told CN earlier this year: “We are of the view that EOT-owned companies are good at retaining, incentivising and rewarding employees. They can help companies become more productive and profitable and stimulate the economy.”
In its latest published financial results for the 12 months to 31 March 2023, John F Hunt Group reported a turnover increase of 44 per cent to £157m and a pre-tax profit of £9.5m.
It was the third biggest demolition specialist by turnover according to the 2023 CN Specialists Index.
The company was one of 10 demolition specialists fined by the Competition and Markets Authority in March for bid rigging. John F Hunt was ordered to pay £5.6m.
