By Giles Karhan, Director of Valloop Australia.
I have spent more than two decades around capital – in Australian banks, wealth management, funds management and as founder of a business providing SME financing. These experiences have taught me three things:
- Good businesses fail more often from ownership problems than product problems.
- Capital, poorly allocated, can hollow out a business.
- Capital, well structured, can help a business flourish for another generation.
Today, in my role as Director of Valloop Australia, my focus is on that third outcome. I am working with founders and leadership teams who want their businesses to outlive them, without selling to a buyer who will strip the culture, move the jobs or flip the company in five years.
Australia and New Zealand are staring at what has been called a “grey tsunami” of SME successions: more than 350,000 Australian SMEs alone are expected to require ownership transition over the next decade. If we do not create practical ways for employees and management teams to buy the companies they help build, many of those businesses will either be sold offshore, wound down or sold in distress.
That is the problem Valloop has been built to help solve.
The Old Problem: Great Businesses, No Buyout Path
Most founders who would love to hand the business to their team run into the same wall: the people best placed to own the business rarely have the personal capital to buy it.
Under traditional structures, an internal buyout usually depends on some combination of:
Heavy vendor finance from the founder
Bank debt secured against business assets and often the personal homes of the new owners
Equity from an external investor that takes a large slice of control
Blue Harbour’s own internal guide to succession planning recognises this problem clearly: employee led buyouts (ELBOs) and management buyouts (MBOs) are powerful continuity tools, but they often need external capital support if the team does not have personal wealth.
The result is that many founders who would prefer an internal deal feel forced into a third party sale.
The Capital Innovation: Turning Surety into Succession Capacity
In 2025 Valloop, working with reinsurance broker Guy Carpenter and a consortium of global reinsurers, launched a new structure that does something quite simple but powerful: it turns institutional balance sheets into capacity for employee buyouts.
Here is the essence of the model, as reported in the reinsurance press and Valloop’s own announcement:
- Up to $75 billion in surety backed capital has been made available to support employee buyouts of SMEs.
- The product is designed to help around one million employees in 20,000 companies become owners by 2030, across the UK, Europe, USA, Canada and Australia.
- The target companies are typically:
- 10 to 250 employees
- A$2 million to $100 million in turnover
- A$250,000 in profit
Rather than asking a bank to lend directly against the business with heavy guarantees, the structure uses a surety instrument. In simple terms:
- Global reinsurers stand behind the obligation to pay the departing owner over time.
- That surety is wrapped and structured by Guy Carpenter.
- Valloop’s platform then uses that capacity to facilitate employee led buyouts, without requiring personal guarantees from the management team.
In my own public commentary and on LinkedIn I have described it this way:
“We enable employee buyouts without personal guarantees or major upfront capital from management, while giving vendors certainty on their deferred consideration.”
It is still a serious, institutional grade obligation – this is not free money – but it is backed by large, diversified balance sheets instead of the family home of the next generation of owners.
Why This Matters in Australia and New Zealand
The Australian and New Zealand banking systems are sophisticated, but they are not optimised for internal buyouts of mid market SMEs.
Typical challenges we see:
- Banks prefer hard asset security. Many high quality SMEs are asset light and people heavy.
- Management teams may have strong track records but limited personal wealth to support guarantees.
- Founders are often asked to stay on the hook for too long, or to accept structures that do not recognise the real value of the legacy they have built.
A surety backed ELBO changes the conversation:
- For founders
- They can sell at a fair, independently assessed value.
- They receive payment over time, backed by rated global reinsurers and a structured platform rather than only by the personal guarantees of their former staff.
For Managers and Employees
They step into ownership without risking their homes or writing an unrealistic cheque on day one. They keep control of strategy, culture and day to day decision making.
For Communities
Jobs, know-how and local supplier relationships stay anchored where the business was built.
In markets like ours, where many founders are on the cusp of retirement and a large proportion of family wealth is tied up in the business, this is not a theoretical issue. It is a practical answer to a looming systemic challenge.
A Values Based Filter, Not Just Another Financial Product
There is a reason Valloop calls its approach a social purpose buyout model. Independent analysis has highlighted that the platform is designed to support employee ownership transitions that generate measurable social impact alongside financial returns.
Two design choices matter here:
The 1by30 campaign
Valloop’s partnership with reinsurers is explicitly framed around an ambition to help one million workers into ownership by 2030, aligned with UN goals on worker poverty, gender equality and reduced inequality.
A focus on stewardship businesses
The model is aimed at SMEs that care about continuity of culture, jobs and community presence, not those looking for a rapid private equity style flip.
In other words, the capital is selective. It is there to back people and businesses whose values already lean toward shared ownership and long term stewardship.
How Valloop and Blue Harbour Work Together
This is Blue Harbour’s newsletter, so it is important to be very clear about how we work together in practice.
Valloop provides:
- The capital structures and surety backed capacity
- The digital platform that coordinates diagnostics, documentation and investor interactions
- The frameworks for employee ownership transitions at scale
Blue Harbour provides:
- Succession readiness work with founders and boards
- Advisory support on selecting the right path, including whether an ELBO is appropriate
- Transaction support through its ecosystem of legal, tax and valuation specialists
- Post deal coaching and governance support so new owner teams can actually succeed in the role, not just acquire the shares
Blue Harbour is the orchestrator that brings together the specialist advisors and coaches to ensure the transition works before, during and after the transaction. Valloop is the capital and infrastructure partner that makes an employee led structure financially and operationally viable at scale.
Where To From Here
For the first time, we have institutional capital structures that are explicitly designed to back people – employees, managers and communities – rather than only external buyers. Used wisely, that changes what is possible for succession in Australia and New Zealand.
If you are a business owner or manager of a company considering a sale, reach out to Blue Harbour to start a structured conversation about employee-led succession.
This article is general in nature and does not constitute financial advice. Any succession plan, ELBO or capital structure must be tailored to your specific circumstances with your own legal, tax and financial advisors.
By Giles Karhan, Director of Valloop Australia
