Sandberg Translation Partners just got a few new owners: its employees.
On May 31, the UK-based language service provider — previously owned by shareholders Jesper Sandberg and Anu Carnegie-Brown — transitioned its ownership to an employee ownership trust (EOT). The trust holds 100% of the company’s shares.
Amid all the M&A buzz in the language industry, EOTs are somewhat of a novel exit strategy for language service providers (LSPs). Essentially, an EOT is a type of indirect employee ownership, wherein shareholders of a company set up a trust that can buy and sell shares of the company on behalf of its employees.
EOTs gained traction in the UK in 2014, after the government there began incentivizing companies to adopt an EOT by introducing tax exemptions.
Sandberg and Carnegie-Brown will remain involved with the company for the time being, as directors of the trading company’s board (they’ll also be on the board of trustees, representing the sellers).
MultiLingual caught up with Carnegie-Brown, the company’s managing director, to learn a little bit more about the process of shifting to employee ownership and what the change means for the future of the company.
“We are at the beginning of this journey, so only time will tell. Judging by the feedback and comments from the global language services community, we are one of the first companies in our industry to have gone down this path,” she says. “To me, that’s an invitation to be transparent and keep sharing how the next steps unfold.”
Editor’s note: This interview has been edited slightly for clarity, length, and house style.
What led you and Jesper (Sandberg, the company’s executive chairman) to consider employee ownership as a potential option for the company’s future? Why was now the right time to make the shift?
We first became aware of this possibility at an ATC Conference in London in 2018, when a keynote speaker mentioned it among other shareholder exit options. It was a fairly new idea then, as the UK government had only started promoting EOTs in 2014.
The typical route to employee ownership is that a private owner starts to think about their business succession or ownership succession, and while Jesper and I have not been in a rush to exit the business, we have often discussed what options would be available for us. Sandberg’s business model as a production company that focuses on only five languages has meant that few potential buyers would want to — or be able to — keep the company running as it is.
While we’ve had plenty of private equity interest over the years and even had a good offer at one stage, we were drawn to the EOT solution because it allows the company and our colleagues to keep doing what they are doing. For the timing to be right, we needed to be able to present a good track record of highly profitable years, and we had to get through a few little hiccups like Brexit and COVID-19 before things settled down enough for this to be the case.
What are the key advantages of selling to an EOT compared to other exit strategies like M&A?
One of the main objectives for Jesper and me had always been to secure a future for Sandberg where we retain some independence and control over what happens to us. I mean independence when it comes to decisions on who we work for, who we employ, how much profit we make, how much year-on-year growth we need, etc. As a company, we would not have retained control over these things if we had sold to another LSP or if we had sold to a private equity fund.
But retaining independence and control is only one of the benefits of selling the shares to an EOT. Because the sellers are in control of the timing and schedule, they can keep working in the company, which provides an extended period for leadership succession to be implemented. while the debt to the sellers is outstanding, they have the right to be trustee directors of the trust as well as remain in their director roles on the board of the trading company.
There are also financial benefits in selling to an EOT compared to selling to any other kind of buyer. In the UK, the government provides tax benefits when an EOT holds a controlling interest; the sale of the shares to an EOT is free of capital gains tax.
How do you anticipate the transition to employee ownership will benefit the employees of Sandberg?
There is an inevitable mental change that happens when you own something. With employees having an indirect stake in the company, you would expect to see greater engagement and commitment, drive for innovation, and even improved business performance. The main financial benefit for the employees is that they get this stake in the business without having to invest at all. They enjoy the benefits of indirect ownership while they remain employees of the company.
Once the previous shareholders have been fully paid for their shares, the employees will collectively receive the full financial benefits that would normally be gained by the shareholders. These profits are not paid out as share dividends but as annual bonuses. In the UK, these employee bonuses are free of income tax up to a point.
Furthermore, by having representation in the EOT in the form of trustee directors, employees will have a say in the destiny of the company and they will hold the board of directors and the management team of the trading company accountable for the way they run the business.
