Exit Strategy: How Meld Studios Transitioned to Employee Ownership

In an evolving business landscape, more companies are exploring employee ownership models. However, Australia has been slow to embrace this trend. Meld Studios, a design firm with offices across Australia, has become a pioneer in this space by selling itself to its employees through an Employee Ownership Trust (EOT).

Janna DeVylder, co-founder of Meld Studios, recalls when she and her partners were approached by a corporate mergers-and-acquisitions firm. Despite multiple offers, the founders were unwilling to sell to a larger organization that might undermine the company’s culture. However, the question of what would happen to the business after their eventual exit led them to consider alternative ownership structures.

After researching various models, including law firm partnerships and design studios like Pentagram, Meld’s founders were inspired by Arup, a UK engineering and design firm that had established one of the earliest employee-ownership models. Arup’s founder had created a trust in 1977 to own the company on behalf of its employees, a concept that appealed to Meld’s leadership.

Despite challenges, including legal and regulatory hurdles in Australia, the Meld team was determined to set up an EOT. They connected with Alan Greig of Employee Ownership Australia, who informed them that Australia lacked a precedent for such a structure. Nevertheless, Meld Studios moved forward as a test case, creating a path for other Australian companies to follow.

The EOT model used by Meld is popular in the UK, where it benefits from government support, including zero capital gains tax for business owners selling to employee-owned trusts. In Australia, employee ownership is more common in large public companies, with at least one million Australians owning part of their workplace. However, there has been little effort to systematize such arrangements in smaller firms.

Meld Studios agreed to sell 75% of its average annual revenue to the trust, which will pay the owners over a decade using the company’s profits. In its first year, the trust chose to distribute profits to employees as a gesture of goodwill, delaying the owners’ buyout payments.

Under the new structure, an “employee council” was formed to give staff a say in how the business is run. While the founders retain their roles during the transition, they have started reducing their presence on the company and trust boards as their ownership decreases.

Meld’s approach to employee ownership reflects a growing interest in models that give workers a stake in the companies they help build. Although the transition has been challenging, DeVylder remains committed to the idea of embedding equity and power into the fabric of the business.

Andrew Pendleton, a professor at the University of New South Wales, notes that studies have shown employee ownership can boost productivity and reduce staff turnover. As more companies consider these models, Meld Studios stands out as a trailblazer in Australia, offering a blueprint for others to follow.