Favorite Lawyer Quotes

Pacquisitions's Blog

iceberg pic“My client was so sure he was right! Every time I showed him a red flag – he charged at it like a bull at a bullfight. The results were predictable.”

“Some mistakes can be papered over. Some cannot. The cost of the difference is astounding.”

“Bad acquisitions can cost you your company. If you’re lucky in a bad acquisition – it’ll only cost you your profits for a decade.”

“People don’t have to listen to me. They should. That’s what they pay me for.”

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Better. Not Broker.


 This is a sad story about the decline of a small town manufacturer. When the economy went into recession, the company contracted from $6MM to $4MM and became unprofitable.

The owner hired a broker to sell the plant. A year passed without any offers from any qualified buyers. Another broker was hired. Of course, by now, the ‘for sale’ issue was universally known throughout the town and morale plunged. Know what else plunged? Business. Being ‘for sale’ is not a great position to have when trying to land new clients. Their revenue contracted further to $3.5MM. They became more unprofitable.

That year also passed with no offers from qualified buyers.

So the owner hired a third broker. And lo and behold….

Continue reading “Better. Not Broker.”

The hidden cost of acquisition


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”

What would you do if you owned this company…

MaturingIndustryChartPaul was in a quandary. He had built up a nice company and captured a decent portion of a rising segment. But looking into the future, he saw trouble ahead. As his segment matured, he forecasted that the segment would commoditize, revenues would drop, and margins shrink.

Like most business owners, dropping revenue and shrinking margins takes the fun out of the game. However, a service segment had emerged. It was in a fledgling stage but showed incredible growth potential.


At first glance, Paul thought his options were:

1) Get out now
2) Ride the wave and get out in a couple of years
3) Build a service division


What would you do? What did Paul do?  Continue reading “What would you do if you owned this company…”

Value (not beauty) is in the eye of the beholder

roughwaterCharlie (not his real name) was excited.

He had worked hard, taken risks, and been rewarded. Charlie had built a $40MM manufacturing business over the years through organic growth and acquisition.

That was how I met Charlie. He became a candidate to acquire a client of mine, a niche manufacturing business that Charlie successfully integrated with his two other channels about a decade ago. Continue reading “Value (not beauty) is in the eye of the beholder”

Secrets Of Family Business Transition


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”

Worst Christmas Ever

shipwreckI was having a cup of tea with a business associate and they told me this sad tale.

Back in the late 60’s, three brothers took out a loan, bought used equipment, and started a small company in the north metro.

They did well, expanded, and upgraded their equipment. Around the turn of the century, the health of one of the brothers began to deteriorate so the other two bought him out. The ailing brother’s family could now provide the kind of care he would need more and more of and the business could afford it. He passed away six expensive years later.

Early in 2014, another of the brothers was diagnosed with the same illness. But the world is a different place now (post 9/11, the Great Recession, etc.) and the buyout offer was not so generous. Really not as generous.

The newly ailing brother wanted to accept the offer so as to not make waves. His family objected and questioned the terms, business valuation … basically the whole deal.

They wanted to be able to provide the same care at the first brother received without wiping out their family.

But that’s not what made for the worst Christmas ever.

There are several second generation players in the business and could soon be seeing the third generation in the business. Well, the son of the last of the three original owners has been peacocking around the front office and manufacturing floor. “The heir apparent” to the last man standing. And he’s been making the kind of statements that will make you cringe.

“Going to be a new sheriff in town.”

“Now we going to see how great this company can be.”

“I’ve been talking to my dad and we’re going to make some big changes.”

All while the family of the newly diagnosed brother are coming to terms with the hard road ahead.

Health issues. Money troubles. Either one is bad enough but taken together, they will bring you to your knees.

Christmas tradition is that the families of the three brothers gather over the holidays. In the past, it had been a time for family dispersements, bonuses, gifts, and much merry-making. This year it almost came to blows.

George and his Banker

Meet “George”

Life was pretty good for George. His manufacturing company of eleven years had twelve well paid employees and he maintained a healthy gross profit after paying himself and his wife a nice salary.

In his slow season, a long-term customer placed a significant order – the kind of order guaranteeing that this would be a banner year. Just two weeks after taking delivery of the order, the long-term customer filed bankruptcy.

Not only did the expected windfall of income and profit not appear, but the invoices from vendors for materials and goods that went into that order did appear – leaving the company with very little money.

George was forced to scramble and take many shortcuts to maintain his vendor relationships and payroll deadlines.

With the business desperately out of cash – after tapping his line at the bank and using credit card debt – George told his banker, Paul, that he would like to extend his credit line for equipment upgrades (when he was really using the money to pay company debts).

Vendor payments became chronically late and George’s firm went from getting early payment discounts to being the kind of customer the vendors sought to replace. Some vendors did replace him and now George was looking for new sources of materials and semi-finished goods. His new relationships offered higher pricing and worse terms which affected the cost of goods sold.

Suffering lower margins and still short of cash, George pulled in any work he could find. (Most business owners know that pulling in crap work will not solve your problems.) His margins got worse and his company began to spend increasing amounts of time and resources on worse and worse work.

It took George about two years to spiral the drain before selling out to some bottom feeders for 18¢ on the dollar.

Paul (you remember Paul, the banker?). Well, Paul didn’t know things were amiss until a couple of payments on the line of credit were late.

So what was Paul’s role? Certainly not one as a trusted advisor. It might be that George was embarrassed or shamed by his sudden turn in fortune. But in reality, it does NOT matter what put George behind the eight-ball. It only mattered what he did next.

Well, here’s what he could have done next:

“Hello, this is Paul.”

“Paul, it’s George over at XYZ.”

“Hey George, how are you doing?”

“That’s what I wanted to talk to you about. Got time for a cup of coffee tomorrow?”

In my imaginary scenario, Paul and George have a cup of coffee and George explains his problem. The fallout required coming up with some kind of a plan that would turn the short term high interest loans into a longer term note that would not suck all the money out of the business.

Remember that George’s firm has a solid track record and was profitable – without the non-recurring loss that forced the credit card debt and short term high interest loans that sunk his company.

Paul could have made the presentation to the bank board and the bank could have agreed to provide the funds at a decent rate and less painful terms. While this might mean a tighter belt for three years, George would have survived the ordeal.

But reality was that the final few years were stressful and unhappy. For him, his family, his vendors, and his employees. I’d like to think that company would still be around today if he had made use of his banker relationship.

Fifty Years Of Great Leadership (what’s so special about Warren Buffet?)

The man (boy) bought his first farm when he was 14.  I was still a paperboy at 14 and certain that my savings would buy the V8 Chevrolet that I had been dreaming of.  

Warren is really smart & genuine and he empowers people (24 people run Berkshire Hathaway).  

His sense of community is incredible. Giving away 85% of his wealth and begging legislators to raise taxes on the rich to make a more fair economy.

On top of all that, I hear that the BH shareholder meeting in Nebraska tomorrow will be more fun than a barrel of monkeys.

A toast to great leadership.









Resolutions Are Hard, Change Is Easier

img_0550Most New Years Resolutions don’t stick. Work on change. It is a process with a greater chance of success. Accomplishing a single positive change will make you feel better (a whole lot better than the vast majority of people that don’t keep their New Years resolution).

Best wishes for a terrific new year and a successful positive change in your life.

Favorite Lawyer Quotes

iceberg pic“My client was so sure he was right! Every time I showed him a red flag – he charged at it like a bull at a bullfight. The results were predictable.”

“Some mistakes can be papered over. Some cannot. The cost of the difference is astounding.”

“Bad acquisitions can cost you your company. If you’re lucky in a bad acquisition – it’ll only cost you your profits for a decade.”

“People don’t have to listen to me. They should. That’s what they pay me for.”

Why Deals Don’t Close


Directors have it doubly hard when it comes to acquisitions.

They have to hire someone that knows how to find appropriate candidates and execute transactions successfully (this person needs a combination of very specific talents – often misrepresented in resumes) and the board must be clear about the criteria necessary in the search (the difference between needs and wants).

Talking with M & A lawyers, you will find that about 50% of deals don’t make it to closing. There are just so many things that can go wrong and it is so costly when it happens. Continue reading “Why Deals Don’t Close”

Fear Not the Hobgoblins of Halloween

iceberg picIt’s the ghosts of acquisition waste and failure that’ll getchya.

Candy filled witches & goblin kids can be kinda cute,

In their chocolately faced sugar high sort of way.

But there is nothing pretty about finding out the frightening facts about non disclosed legal actions, disgruntled key employees, or the haunting feeling that the *acquired target’s inventory is not what we paid for.

We’re all for Toddlers in bedsheets enjoying the acquisition of unhealthy treats, but we draw the line at poor process and tools for acquisitions.

Get out with your candy bags and children and enjoy the sweetness of Halloween

But call us for a less scary experience in the world of acquisitions.

Beyond Financial Due Diligence

By Cary Tutelman

When companies are considering acquiring another company, they do extensive due diligence. They analyze balance sheets, income statements, debt history, customer lists, physical assets and equipment, the product and/or service offerings, etc. This is done to make sure that the buyer knows what they are buying.

However, there is another aspect of due diligence that is typically not done. I call it the non-financial audit. This is an analysis of the organization: its strengths and weaknesses, biggest needs, strength of management, culture, values, work environment and impact of a sale on customers and employees. Continue reading “Beyond Financial Due Diligence”

Finding Better Acquisition Targets (how & where)

img_0550130 years of research & hard work finding target candidates for companies, has taught me where bad candidates come from and how easy they are to find.

It is more common to find acquisition teams weaving a silk purse out of a sow’s ear than to find them working on the front end to build a process and tools that create database of qualified target candidates to meet measurable criteria worked out through meaningful exercise.

Work done on the front end to systematize the acquisition process minimizes the chasing of dead ends & saves considerable  time & money. Continue reading “Finding Better Acquisition Targets (how & where)”

Risk Management Discussion Thread

african art 2The following are the astute observations of Carl Hagberg, pulled from an online acquisition Risk Management conversation about M & A, shareholder value, and strategic issues. My comments (that Carl refers to) follow in the More section.

Carl is Editor and Publisher at The Shareholder Service Optimizer
Greater New York City Area http://www.optimizeronline.com/

& he is Chairman & CEO at Carl T. Hagberg and Associates

As an investor, I am extremely concerned by the perfectly awful returns on investment – overwhelmingly terrible ones as the above-cited numbers point out – that have been booked year after year as a result of bad acquisitions by public companies. Continue reading “Risk Management Discussion Thread”

Voodoo Valuations

I lost a longtime business acquaintance friend not long ago when I responded poorly to his frustrated question about valuation. I told him that valuation in a job shop business under ten million dollars was a moving target based on who was defending it, what the current market was, and the specificity of the application. I should point out that outside of thumbnail valuations, we hire outside valuation experts, as it is a real science.

His question was stated as more of an attack (on outside consultants I think) than a question, as he had overpaid tremendously on his last deal and lost a lot of money because of it.

My answer was direct and pointed, and not meant to make him feel better.

Personally, I really like the guy and wish I had been kinder and gentler. For ten years I have watched from the sidelines as this company has either made poor acquisition choices or overpaid to the point that it would not matter how perfect the fit was (it just could not earn the multiple).

I am an optimist. One day, they might invest in books on valuation, integration, search, and negotiation (and all the other “stuff” that goes into a successful acquisition. Or, engage someone that has a few of those skills.

A Most Unproductive Search

About three years ago a CFO talked to me about his company’s acquisition search process. He confided in me that his firm’s president had traveled a great deal to research potential targets with very poor results.

Based on the CFO’s recommendation, the President met with me to discuss our process and tools.

He quickly told me that I could not possibly add to what he knew about his industry or his database for potential candidates and he showed no appreciation for our criteria measurement tools, or the concept of large scale contact and database building & management that our company provides to clients just like his.

He preferred his one-at-a-time trips to visit target companies and sent me on my way.

Two years after our meeting, I checked in again with my CFO contact and asked the direct question, “has your company completed a transaction since we started this discussion (elapsed total time of five years)”? His answer was “no”.

What this company has spent investigating acquisition candidates, one at a time, nationally and internationally over the past five years is many times what they could have ever spent with a professional for profiling and researching target candidates, compiled in an organized fashion to ensure a selection of well chosen candidates.

This is another case of a board hiring an outside president because they recognized the need to grow their company by acquisition.

Companies like this sometimes feel compelled to make transactions that don’t fit.

That’s where data feeding the KPMG study stating that only 17% of acquisitions created a substantial return add value comes from.

Know the acquisition history of the president you hire if you need to have acquisitions done. If you are working with someone with a small history, it is necessary make up for what’s missing. Acquisitions are a complex, costly, and risky process.

Have something to add? Your own business wit?

Got a different point of view, want to play devil’s advocate, or just think we’re all wet? Post your experiences or examples.

Mike Tikkanen

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