Dairy partnership in practice

The creation of an equity partnership between the owner of one of Britain’s best known Holstein herds and his farm manager has enabled the business to continue and given it a new lease of life.

William Armitage was farm manager for Peter Dixon-Smith, owner of the Lyons herd, deriving income from sales of milk, pedigree cattle and cereals.

Peter, having reached the age of 70, wishes to reduce his workload and semi-retire. There was no clear family successor to run the farming business.

Will Armitage

The challenge he faced was to establish a new profitable farming business based upon milk and cereal production which would give the farm manager an incentive to change his role and provide a return to the owner to encourage him to keep his assets in the farming industry.

The solution was the establishment of an Equity Partnership between William and Peter. The new business rewards the partners for their physical work with a salary. It pays a rent for the land and buildings to Peter as the owner of those assets.

The partnership assets were valued at the start with William investing 10% and Peter retaining 90%. Both partners receive a percentage return on their capital invested and there is provision for William to increase his share if he wishes.

Profits in excess of the above charges are returned mainly to the younger partner for his drive and effort in the business. The partnership was established in January 2004 with an initial 10 year farm business tenancy.

Despite the current econmic conditions it has delivered annual profits. Reinvestment and growth need to be considered by both the partners. A vision and direction has been established for the business, which is already in a strong position, securing a long term future for both partners.

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