This hybrid Employee Ownership Trust Succession Case Study highlights how three founders used a staged approach—beginning with an Employee Share Ownership Plan (ESOP) and later transitioning to a hybrid Employee Ownership Trust (EOT) and Management Buy-Out (MBO)—to achieve a values-aligned, tax-efficient succession.
Client Overview
Paradigm Transportation Solutions Ltd is an Ontario based firm with over 25 years in business. They offer transportation planning and traffic engineering services to public and private sector clients. The three owners of Paradigm understood that succession planning takes time. Back in 2019 they began working with Jennifer Williams, Founder of Firefly Insights, as they started thinking seriously about succession and a phased exit from the business.
Challenge
As the business continued to grow and offers to acquire the business came in, the owners knew that a sale to a foreign buyer or private equity would likely erode all that they had built. A third-party sale did not feel like the right fit—for themselves or for the company—so they began exploring alternative solutions, including employee ownership.
At the same time, they were unsure whether employee ownership would work in practice for their organization. Rather than committing immediately to a permanent structure, they worked with Jennifer to design a “trial” approach that would allow them to test employee ownership, build internal readiness, and evaluate whether it could serve as their long-term succession strategy.
How Firefly Insights Helped
In 2021, a 27% Employee Share Ownership Plan (ESOP) was implemented. This provided a multi-year runway to observe how employee ownership functioned in the business, while giving employees time to engage, step into greater responsibility, and develop an ownership mindset.
The ESOP also served as a foundation for strengthening governance, clarifying long-term planning, and assessing leadership readiness across the organization.
With a successful trial underway, the founders gained confidence that employee ownership was the right strategic succession path. They engaged Firefly Insights to design a permanent solution and formalize employee ownership as their succession strategy.
With the introduction of Canada’s $10 million Lifetime Capital Gains Exemption (LCGE) for sales to an Employee Ownership Trust (EOT), the founders were able to structure an exit that met both their financial and legacy goals. With Firefly Insights’ guidance, they implemented a hybrid succession plan combining:
- An Employee Ownership Trust (EOT), ensuring the company remains in the hands of the people who helped build it.
- A Management Buy-Out (MBO), ensuring future leaders continue to steer the business.
Outcomes
By planning early, the three founders were able to explore employee ownership in a low-risk, practical way before committing tBy planning early, the three founders were able to explore employee ownership in a low-risk, practical way before committing to a permanent structure. This approach strengthened the team, increased leadership capacity, and preserved flexibility around timing and exit options.
As a result, the founders were able to:
- Exit on their own terms
- Receive fair market value for the business
- Take advantage of the $10 million LCGE
- Complete their transition a full year earlier than originally anticipated
For the business, the gradual introduction of employee ownership supported the development of a capable leadership team and allowed for meaningful knowledge transfer from the founders. The company is now positioned for long-term continuity, with ownership and leadership anchored inside the organization.