The first time I walked into Texas CEO John Drew’s office, I was escorted there by one his 3 VP’s, who had met me at the door. As we walked in, the 40-ish VP said, “I’d like to introduce you to John Drew, the father of this company.”
John was a big man, 6’4” tall, broad shoulders, and a bit of a paunch around the middle. John looked up at me, tilted his head to a slight angle, kind of shook it a bit, and said in his deep booming Texas drawl, “I want a blood test!”
I was there to talk to Mr. Drew about the possible sale of his company. I got the guided tour. The Company was a manufacturer, located in a sprawling 140,000 square foot building – sleek, busy, and apparently booming. The atmosphere was slightly casual, energetic, and generally very positive. The language of the plant appeared to be at least half Spanish. The facility was neat and well-organized, and the product they made was intriguing.
As we talked about the business and its prospects for the future, I asked John why he was considering sale.
He said, “Well, little lady, that’s a good question. I’ve got to tell you – I’m just thinkin’ it’s about time. When I started this business, I had a lot of energy. I got up early every day. I ran 3 miles before I came in here. I worked till somewhere between 7 and 10 almost every night. I just don’t have the energy to keep doin’ that.”
“We’ve grown like crazy for 15 years. I think we gotta keep growin’, to stay strong. The way I see it, when companies stop growing, they almost always start shrinking. I’m just not sure I want to keep doin’ this for lots longer. I don’t want to work till 10 at night any more. I don’t have the energy. Shoot, the most exercise I get now is to fill the tub, pull the plug, and fight the current.”
“My people and my company deserve to keep gettin’ the push and breakin’ the records. But I’m tired of bein’ the guy who has to roll the dice every time we take a turn and run in a new direction.”
Business owners like John usually have all of their eggs in one basket. Eventually, they want to reduce risk and step back to family and personal interests. As one of my New Orleans clients once told me, “Every time I think I’m winnin’ the rat race… along comes a faster rat!”
For the business owner who’s ripe and ready, the market is there. Buyers outnumber sellers 30 to 1. Equity funds are flush with baby boomer cash – yearning to put it into productive middle market business use. Banks are hungry and eager for quality financing opportunities. Buyer competition is at an all-time high.
The single most powerful element to selling well is getting that competition. Buyers have money and are geared up to buy, but they also have the assignment, within their own organizations, to buy as cheaply as possible. They can’t pay more than market demands. Al Capone once said, “You can get a whole lot more with a kind word and a gun, than you can with a kind word alone.” Competition is the seller’s only gun.
To the selling shareholder, an aggressive, competitively shopped transaction means more money. To the top executives in a highly priced sale, aggressive pricing means greater job security. (If the buyer has just bought an extraordinary organization, which he paid a premium price for, the last thing he wants to do is lose the resources that MADE it great!)
Strong buy/sell activity is good for America! It rewards the hard work and risk taking of entrepreneurial builders. It feeds the company which is nearing its Peter Principal limits of competence and funding to move on to the natural best “next step” ownership, so that it may continue to grow and flourish. It creates better jobs and improved goods and services for all of America.
Selling well pays dividends all around!