What is the deal?

The Agathos majority buy-out of Plowman Craven, a Hertfordshire-based international geospatial survey company that pioneers new methods and technologies for the property, logistics and infrastructure sectors. The company has a turnover of £19m and 170 employees. The deal, completed in April 2024, is one of the few examples of private equity investment into a company owned by an employee ownership trust (EOT). We had to invest time in developing a new approach, which we will be able to use as a blueprint for other EOT-owned businesses.

How were you introduced to the deal?

Our team originated the transaction. We had known Plowman Craven from before it was sold to an EOT in 2021. We’d been tracking the business – in three years it had doubled in size. It had ambitious international and technological growth plans in the business services sector, both areas where we have extensive experience. In 2023, we found it was looking for a growth partner. With its executive team led by David Locker, we began exploring deal scenarios. The deal took 12 months to complete due to the time required to develop the new structure.

Who were the other advisers?

FRP provided debt advisory; Grant Thornton financial and tax due diligence, and tax structuring advice; CIL provided commercial due diligence; Continuum organisational effectiveness advice; Stephenson Harwood handled the legals. The EOT and the directors took legal advice from Sherrards and tax advice from CMS.

What was the deal structure?

Virgin Money provided acquisition debt and accordion facilities, but the deal value wasn’t disclosed. In many respects it was a typical MBO, but the big difference was how we approached the EOT. I’ve seen PE buy employee-owned companies, collapsing the EOTs into empty trusts, which seemed neither fair nor commercial to us. In our solution, a first, we took a majority stake, enabling a partial cash-out for employee shareholders. The EOT retained a minority stake, allowing staff – including new joiners – to participate in the company’s growth.

Neither we nor the advisers came into this process with a predetermined solution. We worked with the EOT, the directors and the advisers to develop a structure that would deliver an MBO, together with the benefits of employees continuing to participate in the EOT. It was ground-breaking and delivered real benefits to all parties.

What were the challenges?

Undoubtedly there are technical barriers when transacting with an EOT, but a key challenge was lack of precedent for retaining the trust. Another challenge was the time required for value-creation planning, in particular technology development, and further internationalisation. Cohesive plans and well-aligned teams are fundamental to a good investment. Agathos partner Hugh Costello and I joined the board and we introduced Adrian Ringrose, former Interserve CEO, as non-executive chair to bring an independent perspective.

And lessons learned?

There were certainly many technical lessons, which may have proved a barrier for other PE houses looking to invest in EOT companies. We have come up with a practical solution that is repeatable. We’ve also discovered there’s plenty of appetite from employee-owned businesses, which is an exciting community, for growth funding. So we consider this time well spent as we hope to complete similar investments. This deal is a compelling example of what can be achieved.