Family companies and entrepreneurs seeking an exit route are normally directed towards flotation, a sale or a management buyout. However, there can be significant advantages in creating a partnership company out of the original business – and that's the way ahead that Herga Electric chairman and major shareholder Peter Tracey has chosen. In forming such a partnership company, it is easy to understand that employees will like the idea of getting a share in the ownership, but the advantages and attractions of for the owner or major shareholder are not so generally appreciated.
"I started to hand over day to day responsibility at Herga eight years ago," says Tracey. "Since then the company has thrived due to the excellent leadership and dedication of our fine team. My own family did not want to become involved with the company, so the time came to consider the options for the future. First, we could continue as we were today and hope for the best. This could well have led to drift and probably decay. Second, I could sell. This would quite probably have led to production being transferred elsewhere and the closure of our factory. The third option was to transfer ourselves into a partnership."
Today Herga has a team of 150, and exports 50 percent of production. The company has had flexible working for a long time, and there is high priority on developing individuals to make the most of their abilities. Tracey felt that to see this creation destroyed would be a sour end to his career. "I had always admired how the John Lewis Partnership operates, and the clear commitment and enthusiasm of their partners," he explains. "I had a majority shareholding, and I have now given all my shareholding to our new partnership trust. This has been formulated, very much along the lines of the John Lewis Partnership, so that the trust will hold at least 51 percent of the shares in perpetuity. The trust includes a set of operating principles which are immutable, and a set of guidelines which will develop with time."
