1 The Employee Share Ownership Centre and Institute of Directors Employee Share Schemes for SMEs Conference Case Study Perkins Slade Forrest Holdings Ltd 15 th May 2012

2 Perkins Slade Ltd – Case Study PSFH Objectives Buy out retiring Directors Remain independent Encourage wide employee share ownership QUESTION - How to achieve objectives? (Enter Alan Judes as Bacon & Woodrow!)

Ron Forrest Background Ron Alexander & Alexander Services (A&A) Bain Clarkson, Bain Hogg, Inchcape IPO of Bain Hogg aborted and business sold to Aon 1996 Aon merged with A&A Returned to run integration 1999 Perkins Slade

Experience of trusts, share & pension plans 4 Phantom Plan for AHRB Participants did not feel part of parent company Phantom plan was primary determinant of payout Options (held in trust) over A&A shares was initial funding mechanism giving Corporate glue A&A Creation of FURBS trust for funded pension Share plan design for flotation and lock-in Alternative lock-in arrangements for Aon post purchase Shares in Trust v Shares in Treasury Bain Clarkson, Bain Hogg, Inchcape Aon Private company not intending to float Desire to have an incorporated partnership Succession planning and exit route Trust as market-maker, various share plans as tax efficient distribution mechanism Perkins Slade

5 Perkins Slade Ltd – Share Plan Case Study Background Company founded in 1970 by David Slade Current turnover c£5m brokerage £35m premium placements Employee numbers 90 Special niche in Sports insurance (40% T/O) In 2002 Company contemplated sale on retirement of three Director Shareholders (70% equity) New holding company formed – Perkins Slade Forrest Holdings Ltd) PSFH bought 100% of PSL equity Consideration £3.4m Financed by: Issued and paid up capital£1.5m Loans£1.9m (Slade £1m, NG £700k, Forrest £200k)

6 PSFH Share Position 2003 David Slade 33.3% Ron Forrest 33.3% Noble Grossart 33.3% Share Capital Authorised£2m Issued£1.5m

7 Perkins Slade Ltd – Case Study PSFH Objectives Buy out retiring Directors Remain independent Encourage wide employee share ownership QUESTION - How to achieve objectives? (Enter Alan Judes as Bacon & Woodrow!)

8 Perkins Slade Ltd – Case Study Advice given - Form two Share Trusts Employee Share Trust - Purchase shares from Slade and Forrest over time - Vehicle for granting share options to Directors/Managers (via Enterprise Management Incentive Scheme – EMI) SIP (Share Incentive Plan) - SAYE monthly plan for all employees (Both enabling shares to be acquired in most tax advantageous manner) Institute an internal share market mechanism

9 PSFH Share Position 2011 Free float 10% EMI 15%

10 Employees as owners Share Trust 25Individuals/Directors 15% granted as options (- 4 year life - 2 years to invest - no performance criteria) 10%in reserve SIP 35 Individual Employees Directly Held 13 Directors/Employees Total number of employees as owners = 45

11 PSFH Share Position 2011 Takeover £

12 Perkins Slade Limited Share Valuation Formula Value: ((A+B)/2+C) – Dx((A+B)/2+C Definitions: ATurnover excluding commissions rebated to third parties, but including earned interest BProfit before tax and amortisation of goodwill x 5 (profit should also exclude non recurring one off gains or losses CNet tangible assets of the group D25% discount for “absence of market” (per HMRC) One off items are added back in arriving at the appropriate pre-tax profit, but clearly impact on the net assets

13 Portfolio growth – 2003 to date

14 SIP Investment cost -v- value

15 Staff investor numbers to date

16 Perkins Slade Ltd Lessons Employee Ownership has some business benefits (loyalty, commitment, involvement) Equity ownership doesn’t guarantee commitment to independence (if the price is right!) Useful tools in ownership transfer Need for clear exit strategy for minority outside investors Overall mark 7½ / 10