Case Study Resources

Recent Company Conversions to Employee Ownership

At a glance:

Industry: School for children with disabilities
Number of employees: 45
Location: Montpelier, VT
Conversion date: March 30, 2015

About the company. Founded in 2005 by Susan Kimmerly, The New School of Montpelier (Vermont) is a day school serving students ages 6 – 22 with severe disabilities whose needs cannot be met by their school district. This primarily includes children and young adults with autism, cognitive disabilities, and challenging behaviors, often related to trauma. To quote the co-op’s business plan, the school provides “a safe and encouraging environment for our unique learners. Our staff uses therapeutic components based on strong relationships with students to help them be successful.” At the time of the sale to the co-op, the school had served 60 students from 24 schools, with 22 students currently enrolled and 45 employees. The School has a reputation for providing a loving and safe environment for its students, many of whose lives have been greatly improved as a result.

About the transition to worker ownership. The process began as Susan Kimmerly began to consider her succession planning options. She was not interested in selling the school to the most likely buyers, mostly for fear of what would happen to the quality of service. Susan first learned about employee ownership after Marcel Rocheleau, her husband and co-owner, attended a seminar offered by the Vermont Employee Ownership Center (VEOC) entitled “Selling to the Employees: Employee Ownership as a Path for Business.”

Susan and other employees decided to learn more about the process at the VEOC’s annual conference, after which they reached out to Don Jamison, program director at VEOC, to discuss next steps. Susan liked the idea of selling to employees, and felt that the cooperative ethos would be a good fit for the school and the culture of caring that had developed there over the years.  After gauging interest with the current employees of New School, VEOC proposed to provide the owners and employees with program management services designed to facilitate a transition from the school’s present ownership and governance structure to a worker cooperative structure. VEOC worked with New School to find the right service providers, educate staff about worker cooperatives, help New School establish committees to lead the company through the process, and more.

On March 30, 2015, approximately two years after the contract with VEOC was signed, the New School of Montpelier formally became a worker cooperative through the purchase of all the company’s stock from the school’s founders and subsequent issuance of one share to each of the 24 founding co-op members. The leadership transition is still currently underway.

To read more, see this article in the VTDigger.

At a glance:

Industry: Three retail stores- grocery, gas station, and general store with a pharmacy
Number of employees: 60
Location: Deer Isle, ME
Conversion date: June 11, 2014

About the company. For 43 years, Vern and Sandra Seile owned three retail stores on Deer Isle, an island off the coast of Maine: a large grocery store named Burnt Cove Market, a medium size grocery store called The Galley, a hardware and variety store called V&S Variety, and a fourth business, V&S Pharmacy.  The businesses were a staple of the community—they were a major employer on the island and the nearest comparable stores were at least 25 miles away on backcountry roads. Many of the 60 employees of the businesses had been working with the Seiles for several decades—one employee had even been with Burnt Cove Market since it opened in 1973.

About the transition to worker ownership. Vern and Sandra Seile and their three businesses were members of the Independent Retailers Shared Services Cooperative (IRSSC), a marketing cooperative in New England, when they began succession planning. They wanted to sell their businesses and retire, but they and their employees worried that an outside buyer would consolidate operations and cut jobs. The IRSSC’s Mark Sprackland encouraged them to consider selling the businesses to their employees and brought the Cooperative Development Institute (CDI) into the discussion with the Seiles.

Rob Brown, Director of CDI’s Business Ownership Solutions program, which specializes in ownership conversions, helped the Seiles to better understand the worker cooperative business model, and began a conversation with them about how it might work for their businesses. The Seiles decided they wanted to pursue the option and took the idea to key staff at their three stores, who showed interest. After an all-staff presentation by advisors, 80% of the workers signed a non-binding written commitment of interest. A 10-person steering committee was then formed, charged with leading the transition process.

Over the course of the following three months, the steering committee met with Brown and Sprackland for 2-3 hour sessions most weeks to learn about worker-owned businesses, and the steering committee and advisors also held several all-employee meetings. In January of 2014, the new worker-owners and the Seiles signed the purchase and sale agreement. In June of 2014, after procuring financing, the Seiles and the new cooperative closed the deal in a $5.6 million transaction. The entire transition process took a little over a year to complete. Brown notes that selling the businesses to their employees provided the Seiles, the employees, and the community with a “win-win-win.” The Seiles gained a succession plan that would allow them to enjoy a comfortable retirement, employees would have the opportunity to build wealth through ownership, and ownership would stay local, keeping operations and profits on the island.

Note: This case study is adapted from a Case Study on Island Employee Cooperative written by Project Equity.

At a glance:

Industry: Vegetable pickling
Number of employees: 18
Location: Greenfield, MA
Conversion date: May 9, 2013

About the company.  Real Pickles is a Massachusetts-based company that makes pickles from regionally grown vegetables that are raw, vinegar-free, 100% organic, and rich in probiotics, using the traditional natural fermentation process. Founded in 2001 by Dan Rosenberg, Real Pickles is, “committed to promoting human and ecological health by providing people with delicious, nourishing food and by working toward a regional, organic food system.” In line with its social mission, the company buys its vegetables only from Northeast family farms and sells its products only within the Northeast, and the products are made in a solar-powered facility.

About the transition to worker ownership. In 2012, after 11 years in business, Real Pickles had achieved financial stability, a strong twelve-person staff, and was having a substantial environmental and social impact supporting local, sustainable food systems. The co-owners, Addie Rose Holland and Dan Rosenberg, were aware of the typical path of businesses like theirs—continued growth followed by selling out to a large industrial food corporation. In order to ensure that Real Pickles stayed small, independent, and locally-owned, and secured its social mission for the long term, the owners began looking into worker ownership as an alternative to this typical process:

“We have decided, then, to try to help re-write the standard storyline for a successful organic food business.  We are interested in creating a new structure for the business which will support both its continued financial success and success in contributing to a better world.  And, while neither of us have any plans to leave Real Pickles anytime soon, we want this structure to help ensure that Real Pickles can be viable in the long run by eventually coming to be able to thrive without dependence on its founders.”

Five current employees—all managers—decided to become the founding worker-owners, and met outside of work hours to drive the transition forward, collectively making decisions about the new worker cooperative, including a one-year eligibility criteria, $6000 buy-in, and institutionalization of the company’s social mission. The founding worker-owners also determined a value for the business, and then were faced with the task of finding financing for the deal that was in line with their social mission and values.

The company reached out to the Solidago Foundation, a foundation with deep financial expertise that promotes justice, equity, sustainability and enfranchisement for all. The foundation’s CFO, Jeff Rosen, introduced Real Pickles to Cutting Edge an Oakland, California-based consulting firm working to make community investment accessible and affordable to small local businesses. Real Pickles worked with Cutting Edge Capital’s then CEO, Jenny Kassan, who introduced the company to the idea of a direct public offering, or DPO. With this option in mind, Real Pickles also sought advice from the Pioneer Valley Grows, a collaborative professional organization that provides financing and technical assistance to area food businesses, and Equal Exchange, an established worker cooperative that has structured successful private investment campaigns, to determine the best way to structure the financing.

In the end, Real Pickles decided to raise capital through a DPO, offering preferred, non-voting equity in the company with a targeted 4% annual dividend. This option enabled the company to publicly solicit relatively small investments from community members. The company was able to raise $500,000 in community capital in two months, and officially became a worker cooperative in May of 2013.

Note: More information about the Real Pickles case study is available from Cutting Edge Capital, Project Equity, and from the Real Pickles blog.

Links to additional case study resources

The Lending Opportunity of a Generation: FAQs and Case Studies for Investing in Businesses Converting to Worker Ownership
Cooperative Fund of New England, Democracy at Work Institute, and Project Equity

Case Studies: Business Conversions to Worker Cooperatives
Project Equity

Companies We Keep
John Abrams, South Mountain Company

Namaste Solar a Profile on Cooperative Ownership
Center for Social Inclusion

Successful Cooperative Ownership Transitions
University of Wisconsin Center for Cooperatives and Democracy at Work Institute