Come to Me

“I’ve given this a lot of thought,” said Serena, “and I’ve decided to pull my offer.”

After 2 weeks in the data room she had emerged with all the facts that she needed.?

Earl and Larry gaped; they thought this one was in the bag.?

First approaching them with a merger prospect, Serena had upped this to a takeover offer, when a property investment had brought a windfall.? The partners had been buoyed by Serena’s suggestion of a higher multiplier than they had expected.

In response, they had set up a data room with the full financials from the preceding 3 years, their legal advisers drew up a confidentiality agreement, they had secured a deposit and stipulated a 2-week access limit.? As a precaution they insisted on a non-exclusivity clause, but they were yet to be approached by anyone else.

“So…that’s it? It’s all over?” said Earl.? “I never thought…Larry said that this could be a trick.? I can’t tell you how disappointed I am—we are.”

Larry pursed his lips and gave a resigned shake of his head. “Very disappointed,” he said.

“Earl, Larry, hold your horses,” said Serena.? “I’m withdrawing my offer to buy the business outright. What I want is a third share instead.”

Silence.?

”But you’re fully cashed up, you can afford it,” said Earl.? “Can’t you?”

“Yes, I can, but that’s not the issue,” said Serena.

“The numbers stack up and I still think that there’s a multiplier of 4 in there, based on the averaged net of the past 3 years; plus your order book.?

“You guys have built a good business, a very good business, and looking under the covers, it’s everything I expected to find—and more.

“And don’t take this the wrong way: I believe that the value you have built up is largely personal.? I am sure that if you walk out the door—next month or next year—the business would suffer.? I would have a diminished asset, no doubt in my mind.

“What I’m talking about is the emotional value of this transaction: your relationships with your staff, with your customers, the reputation you have built for the business over the years—especially when you looked after everyone during the pandemic.”

“Well, just absorbing price rises and keeping everyone employed—they were no brainers really,” said Earl.

“But your competition was doing the opposite.? Your actions meant a lot to your customers and your staff and it means a lot to me as a prospective owner,” said Serena.?

“And it also means that I want to sit alongside you guys—not replace you.

“I’m hoping that we can take it instead to a new level—to a great level—if you maintain your ownership and I join as an equal partner.? I’m proposing three equal shares.”

More silence.

“I know it’s seems like we’ve come full-circle—but I think that the influx of cash skewed my judgement a bit,” said Serena.

“And ours too, to be truthful,” said Larry.? “We were thinking of a glorious sunset, but this needs some reconsideration—don’t you think Earl?”

“I guess it does, so maybe we sit with it over a couple of days and get back to you Serena”, said Earl.

“Understood,” said Serena.

“Just to confirm, my offer is a third of the agreed valuation, payable in cash.? And if you accept, I would also be happy to pay for a new shareholders’ agreement to be drawn up.

“But for the time being, I will say goodbye and look forward to hearing from you.”?

“I think that we can come back to you in a day or two,” said Earl as they shook hands.

The 2 partners watched as Serena’s car pulled out of the car park.

“Do you know the surprising thing about this Larry?” said Earl.

“What, that we should have waited for 2 more years of better margin to get a higher valuation?”

“No.? That it’s changing the dynamic between us,” said Earl.? “I can see that, after all this time, with Serena’s influence, true long term value will finally come to me—and to us.?

“What do you think Larry?”

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Next week:? Bruce Dodd, The Mediation Table and BOLA

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About the Author

Jeff Bell?is Principal of executive consultancy ResultsWise in Perth, WA.?To boost your leadership, ask Jeff about Band of Leaders Australia (BOLA) [email protected] and his consulting, coaching and strategy facilitation, or his Advanced Leadership Course [email protected] Mobile 0439 988 662.