On January 1, 2017, Arbor Assays announced that would become the first US life sciences company to be 100% perpetually employee owned.
Wishing to pass the company to its 11 employees, the owners of Arbor Assays worked with the Law Firm of Deborah Groban Olson, PLLC and the Center for Community Based Enterprise (C2BE) in Detroit to develop the financial and legal framework for the sale to employees, using a model that’s fairly common in the UK, but new to the US.
The former owners continue to be fully involved in the business which will now be managed as an employee-owned business.
Dr. Russell Hart, said: "We want Arbor Assays to remain an independent and successful business and were impressed by how the perpetual trust model can achieve this. Shares are held on trust permanently for all employees, rather than allocated among staff as happens with ESOPs. This means there are no repurchase obligations that can destabilize a company's ownership. Profits that might otherwise be distributed to investors are available to pay out to staff as bonuses. We hope our adoption of this business model will encourage others in the US to do likewise and for the US tax authorities to consider tax breaks to encourage its take-up, as has happened in the UK. We appreciate C2BE’s help in providing a range of talented professionals with strong employee ownership experience to guide us through this transaction.”
Attorney Deborah Groban Olson, Executive Director of the Center for Community Based Enterprise (C2BE) said, “We worked with Arbor Assays’ founders and employees to explore various means for accomplishing employee ownership that would include robust employee participation in the corporate governance, avoid unnecessary regulation and costs, and keep the business independent and rooted in Ann Arbor. After reviewing a number of options, including Employee Stock Ownership Plan (ESOP), a worker cooperative and the perpetual trust methods, Arbor Assays choose the perpetual trust as the most efficient and effective option. C2BE assisted the employees and the sellers to arrive at a mutually agreed fair price, and will continue to work with Arbor Assays as it builds its employee ownership culture and systems.
The Arbor Assays trust establishes proof of concept of a new method of employee ownership that other American companies can adopt. The trust model of employee ownership is long established in the UK. The UK's John Lewis Partnership, with its successful supermarkets and department stores, employs almost 89,000 permanent staff and is 100% employee trust owned. Its trust ownership started in 1929. There are many other examples that demonstrate this is a tried and tested way of owning and running a business”.
C2BE connects people and companies interested in developing employee ownership with technical advisors and education. The C2BE Arbor Assays project team, including David Drews and the Law Firm of Deborah Groban Olson, PLLC, represented the employee owners in the transaction, the UK firm of Fieldfisher created the UK trust and the sellers were represented by corporate counsel. David Drews of Justus Equity, a C2BE advisor, helped with financial modeling and the valuation of the company. Mr. Drews recently agreed to serve on the Arbor Assays board of directors.
Bobbi O’Hara, R&D Project Manager at Arbor Assays, led the employee group through the transaction. Initially elected as the Employee Representative, she is now one of the Company Trustees. Bobbi O’Hara said: “Making the decision to transition from private ownership to perpetual trust speaks volumes about the faith in our collective competencies and the importance in taking care of each other, not just as coworkers, but as a community with a common goal. As employees, we are excited to see how we'll shape our shared responsibility and direct this opportunity to have an impact for the benefit of us all."