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. Continue reading “The last mile is the hardest”
Tom was a proud father. After ten years in lesser positions at his business, his two children (Sara and Jim) were to begin higher level participation. Tom did have a lot to be proud about – his mom and pop shop had grown into a multi-million dollar enterprise that was a significant employer in an out-state town and his children had completed college and had chosen to be part of the family business. Continue reading “The hidden cost of acquisition”
Broker driven and opportunistic deals are appealing and the excitement of the chase builds quickly. Some of the team members have done a few acquisitions, we are smart, successful, and experts in our field, why wouldn’t we be winners at the game of acquisition?
I like making brick paths and walls and feel a great sense of accomplishment when I have completed some small structure with bricks in a home project.
But when I watch a real brick layer complete a commercial project, with what looks like a thousand precisely placed bricks in one afternoon, I am aware of the skill and practice being demonstrated. I do not compete. I’m pretty sure acquisitions involve more complexities and pitfalls than bricklaying.
50% of acquisitions don’t make it to the closing table, and according to Wharton, Harvard, and Deloitte, 60% of acquisitions destroy value. and over 80% don’t add a sustainable competitive edge.
Then there are the giant losses incurred by completing seriously flawed transactions. A recent client was still paying for a bad acquisition ten years later (losses exceeded the purchase price).
It’s allot more fun to complete a deal that took a little longer and see it add value than it is to spend years undoing or making up for an imperfect transaction.
Knowledge is power – experience our short free webinar. email@example.com
After years of growing a profitable business in the northern suburbs, Marvin woke up one morning and knew that it was time to get out. Now, it just might’ve had something to do with a very cold temperature and continued frozen forecast. But for whatever reason, Marvin’s brain flipped a switch and retiring and moving south were all he thought about.
Well, as luck would have it, a fellow Rotary member named Alan, expressed an interest. They sketched out an agreement then had Al’s lawyer put it in legalese. Inside of thirty days, Marvin had put his house on the market and moved to Florida.
It was everything Marvin had dreamed about: moderate temperatures, relaxed schedule, and the beginnings of a social life.
Three months into retirement all was going well. His Minnesota house had sold. Alan’s business purchase payments were coming in steadily.
Six months into retirement he couldn’t believe he hadn’t done this sooner. But Alan’s payments were starting to be late…
Less than a third of family businesses transition successfully to the third generation. 70% fail or are sold.
Not quite 10% continue as active privately held companies for the third generation to manage.
It is our nature to think that a family business transition can be navigated by the founder and family without outside help (interference?).
Families are complicated, people are complicated, and business is complicated. Combining personal, family and business decision making is exponentially complicated. Continue reading “Secrets Of Family Business Transition”
Last week, Packard Group watched from the sidelines when a bank shifted a business credit to a workout group. By the time we were referred in, the Bank had made it’s decision and it was out of the hands of the owner.
Here’s the story:
Two years ago, the train wreck took place. In the months, quarters, and years that followed, the company was losing money, marketshare, and human resource assets. Suddenly, denial was no longer an option. All too late, the owner reached out to their attorney, desperate for a conversation that could save the company from being picked apart for dimes on the dollar.
Packard gets the referral (from the company’s lawyer) and a conversation takes place. Options and game plan. When the owner called the Bank, they were told that it was no longer in their hands, and they were going into workout. Everybody loses but the bottom feeders.
Lost projects of this sort happen all too often and here’s why: Federal and State regulators demand that bankers make question loans disappear, so it’s not fair to throw rocks at bankers. In this marketplace for money, most banks are forced to work with a short list for eliminating the stress of an underperforming business credit. The business owners do not see the razor sharp teeth of the workout group until they are firmly in its grip. It’s a fire-sale with the only purpose of getting the bank out from under the loan. It has nothing to do with the potential value of business divisions or assets to the right buyer. Workout doesn’t seem to bother with the right buyer, just A buyer.
It is the saddest when this happens near the end of a great run by an owner close to retirement with no time to recover lost ground. I’ve seen them cry as their workforce is dismissed after years of loyal service, millions of dollars of equipment becomes worth a dime on the dollar, and a perfectly functioning factory building is auctioned off in the fire sale. When you’re 45 yrs old, recovery is an option – at 64 yrs old, it is a long shot.
There are many savvy bankers working the credits of our area, and if you have one, you are a lucky business person. If you run into events that steer your company into troubled waters, your savvy banker will see it and bring to your attention remedies to avoid the big trouble that culminates with the introduction to the workout group.
Not paying attention to your banker pointing out troubles (or not believing the troubles to be real) is not uncommon among business owners and the exacerbates the trouble and angers the bank. Not a good idea. It amazes me how often I witness head-in-the-sand behavior by otherwise smart people.
Reacting wisely and well is the better choice.
By the way, last week’s deal will see many people out of work, a big pile of equipment on the auction block, and a sorrowful ending to a long established business.
Could’a. Would’a. Should’a.
Now some of you may have been aware of a market correction from 2008-2011 and this comparison is about the effect of time on your plans to harvest your business.
Both owners saw their revenue contract but they took difference approaches. Continue reading “Retirement = Current Business Value)/time * Options – what is retirement worth?”
From an early age, Sam saw possibilities – and growing up in an entrepreneurial environment, he was encouraged to act on them. Soon he was ‘inventing’ little mechanisms and gadgets. Following his primary school years, he pursued and achieved a degree in engineering and worked, successfully, for a couple of companies. That’s where we pick up his story… Continue reading “The Inventor’s Dilemna (it’s the people)”