Two partners, Bob and Tom, were getting tired. They had met years ago while both employed by the same company and together had developed a better mousetrap. Now it was 18 years later and they were looking for a way out.
The business they co-owned did alright and had provided well for their families but would best be described as a life-style business. The company threw off healthy owner compensation but not high profits.
Without Bob and Tom, the company wasn’t worth too much – but the bloom was off the rose and both owners wanted a less fully-engaged chapter.
They spit-balled on their several options:
1) contact a business broker to put their company on the market
2) try to make a direct deal with a competitor
3) sell it to their key employee
4) sell off the bits and pieces and ride off into the sunset
They bought an hour with their lawyer and sat down to go over their options…
Now their lawyer, Scott, was a wise enough fellow to know that asking a broker if you should sell your business on the market is like asking your barber if you need a haircut.
Additionally, Scott knew Mike Tikkanen and so he knew that their options were more robust than Bob and Tom thought. So Scott set a meeting at his office to introduce Bob and Tom to Mike.
What will Bob and Tom do? Click here to read the second half of this brief case study…
To keep this story short, I’ll skip ahead and let you know they engaged Mike and the Packard Group on the advice of their lawyer for these reasons:
• choosing Mike meant they got to explore all their options concurrently
• choosing Mike would be less expensive than the broker fees
• choosing Mike allowed them to maintain their normal duties
While Mike’s system looks up and down along the food chain and side to side amongst competitors, it also casts a net 15° off center in each direction to give the widest possible grouping for interesting candidates.
Each candidate conversation was backwashed against the detailed and ranked criteria that was established in pre-launch meetings.
While the possibility of selling the company to their key employee was heart-warming, it didn’t meet the financial criteria that Bob and Tom had agreed was the basement. As the candidate pool was winnowed down via research and evaluation, several started to stand out.
One was a competitor along the horizontal plane. One was below them in the food chain looking to break up and out into bigger things. The last was above them but off-center and looking for a foothold in their region. It was 75 days into the engagement with Packard and on their desk were three folders.
Several candidates fell off for various reasons and it was pretty evenly matched among these threefinalists;
Candidate A scored slightly higher on the financial aspect
Candidate B scored slightly higher on the compatibility aspect
Candidate C scored slightly higher on the stability aspect
What happened next is always fun to watch. Bob and Tom were basically fought over.
Two guys who thought harvesting their business might not be doable. In the end, they made a handsome deal with Candidate B. They stated several reasons for their choice:
• the higher level of compatibility will make for a comfortable transition for their existing clients and that was important to them
• that candidate was willing to make a side deal with their key employee to bring her in as a minority partner and that felt right
• the difference in the money was nothing to lose sleep over
Bob and Tom agreed to a 2-year contract to make sure the clients were successfully handled through the transition. Knowing that their last day was set gave them peace of mind and are currently happily making it work.
I love it when a plan comes together.