Under the Hood of Canada’s First Employee Ownership Trust Transaction: Grantbook’s Landmark Sale
In a groundbreaking move that reshapes Canada’s corporate landscape, Grantbook, a Toronto-based consultancy, has become the nation’s first company to be acquired by an Employee Ownership Trust (EOT). This historic transaction, finalized on January 1, 2025, marks the debut of EOTs in Canada, following the introduction of new tax rules designed to foster employee ownership among small and medium-sized businesses.
Employee Ownership Trusts, first established in the UK, are trusts that enable employees to share in a company’s success through profit-sharing and decision-making. The Canadian model, inspired by the UK’s success, aims to enhance equity and inclusivity in business ownership, aligning with the government’s efforts to promote economic resilience and employee engagement.
Grantbook, founded in 2012, is a thriving consultancy serving the philanthropic sector with a team of about 50 employees. The transition to an EOT was part of a strategic exit plan by co-founder Peter Dietz, who sought to preserve the company’s values-driven legacy. The EOT structure offered the ideal solution, ensuring Grantbook’s continued independence and prosperity.
The transaction highlights several key features. Grantbook is now majority-owned by the EOT, with employees holding a majority stake. The government’s $10 million capital gains tax incentive for EOT sales played a crucial role, mirroring the UK’s approach. The process was supported by legal and financial advisors, underscoring the complexity and significance of this pioneering deal.
As Canada’s first EOT transaction, Grantbook’s sale sets a precedent for other businesses. Industry experts predict a rise in EOT adoption, citing growing interest and the success seen in the UK, where EOTs now account for about 8% of business sales. This shift is expected to transform the Canadian business environment, promoting greater equity and employee involvement.
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Under the Hood of Canada’s First Employee Ownership Trust Transaction: Grantbook’s Landmark Sale
Employee Ownership Trusts, or EOTs, have their roots in the UK, where they have proven to be a highly successful model for employee ownership. The UK’s EOT program has been instrumental in fostering greater employee engagement and business resilience, with EOTs now representing about 8% of all business sales in the UK. Inspired by this success, Canada has adopted a similar model, incorporating detailed rules into the Income Tax Act to facilitate and encourage employee ownership of small and medium-sized businesses through EOTs.
Grantbook, a Toronto-based consultancy serving the philanthropic sector, has become the first Canadian company to sell to an EOT. Founded in 2012, Grantbook has grown into a thriving organization with approximately 50 employees. The transition to an EOT was part of a planned exit strategy by co-founder Peter Dietz, who sought to ensure the legacy of the values-based business they had built together. The EOT provides a perfect solution, setting Grantbook up for continued independence and success.
The transaction highlights several key features of the EOT structure. Grantbook became majority-owned by Canada’s first EOT on January 1, 2025, with employees now sharing a majority stake in the business through the new trust. The EOT must meet specific rules, including selling at least 51% of the stock to the EOT, naming all current and future employees as beneficiaries, and allocating dividends and sale proceeds based on relative pay, seniority, hours worked, or a combination thereof.
Industry insiders suggest that more EOT transactions are in the pipeline. Michael Ras, CEO of Employee Ownership Canada, notes that interest is growing, and there’s a clear buzz in the market. The UK’s experience, where EOTs now represent about 8% of all business sales, indicates a promising trajectory for Canada.
EOTs offer several benefits, including increased productivity, improved employee income, tax benefits, and succession planning. Studies show that EOTs in the UK are more productive, grow faster, create more jobs, and are more resilient than their peers. Employees benefit from sharing in profits and participating in business decisions. The $10 million capital gains deduction provides significant tax benefits for current owners. EOTs also offer an alternative exit and succession planning option for business owners.
Conclusion
Grantbook’s landmark sale to Canada’s first Employee Ownership Trust marks a significant milestone in the nation’s corporate landscape. By adopting the EOT model, Grantbook ensures its legacy of values-driven operations while paving the way for broader adoption of employee ownership in Canada. The transaction highlights the potential of EOTs to enhance equity, productivity, and resilience in businesses, aligning with the government’s goals of fostering economic growth and employee engagement. As more companies explore this model, Canada may follow the UK’s trajectory, where EOTs have become a vital part of the business ecosystem.
Frequently Asked Questions
What is an Employee Ownership Trust (EOT)?
An Employee Ownership Trust (EOT) is a trust established to hold shares in a company for the benefit of its employees. It allows employees to share in the company’s success through profit-sharing and decision-making.
What are the benefits of an EOT for employees and businesses?
EOTs offer increased productivity, improved employee income, tax benefits, and effective succession planning. Employees benefit from sharing in profits and participating in business decisions, while businesses gain tax incentives and improved resilience.
How did Grantbook’s EOT transaction work?
Grantbook became majority-owned by the EOT on January 1, 2025. The EOT holds a majority stake, with employees named as beneficiaries. The transaction was supported by legal and financial advisors, leveraging the $10 million capital gains tax incentive.
What tax incentives are available for EOT sales in Canada?
The Canadian government offers a $10 million capital gains tax deduction for EOT sales, encouraging business owners to consider this model for succession planning.
Will Grantbook’s company culture change under the EOT model?
Grantbook’s transition to an EOT was designed to preserve its values-driven legacy. The EOT structure ensures continued independence and alignment with the company’s mission and culture.
Is the EOT model expected to grow in Canada?
Yes, industry experts predict a rise in EOT adoption in Canada, inspired by the UK’s success, where EOTs represent about 8% of all business sales. Growing interest and favorable tax rules are expected to drive this growth.
Why was Grantbook a good fit for Canada’s first EOT transaction?
Grantbook’s values-driven approach, stable operations, and clear exit strategy made it an ideal candidate for the first EOT transaction. Its size and commitment to employee engagement aligned perfectly with the EOT model’s objectives.