TVG

Jim (maybe his real name) left a great corporate job to buy a business in the mid-90s. A few of his friends told him he was crazy. The rest of his friends probably thought he was crazy but just wouldn’t say it.

If Jim’s wife thought he was crazy, she didn’t say it. She willingly agreed to move to another state where the business was located. Motivated by a lifelong desire to be an entrepreneur, Jim assumed the business he acquired would take him into his retirement years. Deep in his heart, he hoped one of his three children would eventually want to take it over.

Then life happened. Through a series of events he couldn’t have foreseen, Jim’s business value grew substantially, and it wasn’t long before potential buyers began calling. He wasn’t interested in selling, having recently left corporate life and moved his family 700 miles. He was doing exactly what he wanted to be doing.

Until the call... the call when he heard a number he thought he’d never hear, at which point selling seemed like quite a good idea.

The buyer was a publicly traded company that had grown through acquisition. Since Jim was an experienced businessman, he assumed he could negotiate deal points himself. He didn’t use, or even reach out to, a third-party intermediary for advice on the deal or the process. Unbeknownst to Jim at the time, the buyer had an acquisition methodology that had been perfected over dozens of transactions. Let’s just say the deal didn’t end up like it started.

Jim’s Big Dumb Fail was not recognizing the imbalance between a sophisticated buyer and a first-time seller, even though he was an experienced business executive. Even by the time an experienced M&A lawyer was engaged, it was too late. The balance favoring the buyer had tipped so significantly, all Jim could do was succumb to deal changes adroitly situated by this astute buyer or walk away. Jim was left with these inevitably bad alternatives because his pride and inexperience got the best of him.

Growth through acquisition is a common strategy for many American businesses, so it isn’t uncommon for a business owner to get a call from a larger player to gauge that owner’s interest in selling. In those cases, don’t make the Big Dumb Fail that Jim made. It could cost you a lot of money and/or wasted time or resources. Jim’s advice now to all business owners, before selling your business or even engaging in conversations with a a potential buyer, engage an experienced business intermediary who has experience at least at the experience level of the potential buyer.

Do what Jim says, not what Jim did.

 

Tennessee Valley Group

Jim is an attorney (non-resident status with the Missouri Bar) and though he no longer practices law, he has read and negotiated enough legal documents to fill a cargo tanker. He has an MBA from Harvard Business School and knows how Wall Street and private equity operates. Jim is a Tennessee Supreme Court Rule 31 listed general civil mediator with tons of experience helping business owners (large and small) work through sensitive problems to achieve winning results. He is the author of "Home Run, A Pro's Guide to Selling Your Business, Seven Principles to Make Your Company Irresistible."