The last mile is the hardest

last_mileTwo 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”

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.

Don’t Bring This to a Closing

solar eclipseBefore I tell you the one thing you should never ever bring to an acquisition closing, I need to give you the background….

Company X was a successful company. Especially when you consider that on $3MM in revenue it spun off 30% in pre-tax profit. For over twenty years the owner, (we’ll call him Harold) ran and grew his business with savvy planning and shrewd decision-making. 

Harold’s only son, (we’ll call him Donald) worked in the business and had spent time in each discipline as he was being groomed to take over when Harold was ready to pass the baton.

Best laid plans and all that.

Harold was hospitalized after being diagnosed with advanced cancer and 24 yr old Donald was put in charge.

Fast-forward five weeks and Harold is back in the office part-time while working through his radiation and chemo regimen.

(It is important to know that company x is a small, 10-person niche manufacturing business with long-standing employees)

 Harold is in his office when five of his employees come in and shut the door. They say that they speak for rest and tell Harold that they will not work for Donald.  Donald has been derogatory and denigrating to the ‘peons’ for years. They had laughed Junior off as they were treated wonderfully by Harold, generously paid, and received abundant benefits for their good work.

However, during Harold’s hospitalization, Donald’s attitude had sharply worsened and more importantly, was observed doing cocaine at work.

************************ Continue reading “Don’t Bring This to a Closing”

Value Insights

 

 

What We Know That Just jimearlyphotoAin’t So, or


Value Insights

 

 

Unanticipated mundane external factors are most often responsible for dumping our transactions into the 80% that don’t add value category. 

 

Carefully developed evaluation and due diligence models offer the best chance of uncovering the questions that if answered properly, will cause us to avoid the failures that affect the great majority of acquiring companies.

 

To have great evaluation and due diligence models without a strong team that can recognize, develop, and work with the tools will drop you short of your goals also.

 

 

The assumptions made in the board room about the talents, team members, roles, responsibilities, systems, and procedures, determines the accuracy of the search and the effectiveness of the due diligence. 

 

A smart team with the right resources can execute the complex task of acquisition at a far lower risk factor than a half smart team with almost the right resources.  The losses can be staggering.  The investments in team and resources are quite modest in comparison.

 

 

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

 

Brought to you by;                                         www.packardacquisitions.com

Key Man Insurance

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Key Man Insurance

 

The deal was almost done.  The owner was asked if he has prepared his key man for the transaction.  Specifically, he was asked if he had promised the key man a bonus for sticking around for 12 months to make sure that the new corporate owners would transition well into the client base and management team. 

 

This was a rich deal for the owner.  The owner assured us that he had generously compensated his key man.

 

Days before the transaction was to close the key man quit and moved across the street to another plating company.  The owner had thought our concerns overblown and had in fact done nothing to incentivize his key man. 

 

This deal fell out of bed with a non retrievable thump.

 

Tightness of wallet cost this seller millions of dollars (and nearly a heart attack) when his deal collapsed when the key man left.

 

In trying to patch up the transaction and talking with the key man, I discovered that he would have been happy with a small amount of money and a little more title but he was felt damaged by being treated like part of the woodwork.   Due diligence is more than validating the numbers. 


Have something to add? 
Got a different point of view, want to play devil’s advocate, or just think we’re all wet? Post your experiences or examples.                                                                                                                                                                                 Brought to you by;                                         www.packardacquisitions.com

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