Monthly Archives: August 2015

So, What if You Get Hit by a Bus and Have no Business Exit Plan?

Believe it or not, it happens. In fact, far more often than you would think.

Research shows that not more than 30% of private company owners have spent any time developing an exit plan. Or, in the alternative, a family transition plan.

What happens if you die unexpectedly? What happens to your business? To your employees? To your family.

I can tell you, it very often does not work out well for anyone involved.

Here are two recent, real-world examples.

A sole proprietor of a retail and B to C landscaping business in a small town about an hour away died unexpectedly. He had no exit plan. Worse, like most small company business owners, he had no strong number two manager. He’d spent no time or money investing in training a successor or, even someone to be a secondary keeper of business knowledge and process.

He and his wife had been married for nearly 40 years and had one daughter.   His wife had never worked in the business and his daughter was a successful and tenured senior manager in a multi-billion dollar company. Plus, she was on the fast track for further advancement.

And, then, her father died. Her mother was inconsolable and had no experience in the business world. His daughter was forced to quit her job, spend countless hours away from her home, husband and two young children for nearly 18 months while she worked in her father’s business to help her mother wind the business down, liquidate inventory and close it.

With all the knowledge and customer relationships dying with the owner, the business had no value. His wife walked away with nothing. His daughter sacrificed her career. His employees all lost their jobs.

All for the lack of any kind of advance exit and succession planning.

 

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Another case

A man spends over 20 years building a heating and air condition repair and installation business in a major Midwestern city. He grows his business to include 10 men and company 10 trucks working for him from his leased corporate headquarters.

Again in this case, the business owner died suddenly. He had no exit plan, no succession plan and no one else who knew anything about running the business. Or, who even had access to his books and records other than his bookkeeper.

His 10 employees came to work as usual one morning. But, the boss was a no show. After some time, they learned that he had died. They were directionless. And, they were no longer motivated to work because they had no idea whether or not they would continue to get paid.

Again, the grieving wife, with no business experience much less HVAC repair and installation experience, was forced to take over the business.  Or, in this case, what was left of the business.  In no time at all, 2 of the former employees left the company, took the customers that they had relationships with and formed their own company.

The end result, once again, was a company with no value so the man’s wife was left with no wealth creation outcome from a business her husband had spent decades building. And, she was forced to deal with a failing business that she knew nothing about while dealing with the sudden loss of her husband.

The upside to a well-structured exit or transition plan is extraordinary in both a reduction of the potential emotional toll on your family, the protection of employees and your business legacy and the ROI on enhanced business valuation.

The commitment in time and the modest expense combine for an incredible business value.

Note: If you have an interesting and/or educational CEO story of Head Noise caliber, write to me at cbishop@capitusgroup.com. I’d love to speak with you and share your story in my Head Noise blog. You can tell your story either on the record or, without attribution.

Cameron Bishop is a partner with The Capitus Group. The firm provides comprehensive business value enhancement and transition strategy solutions. Partners and Advisory Directors comprise an experienced team of business professionals who have successfully owned, run, grown and sold companies. Capitus utilizes proven value enhancement and risk reduction techniques to enable superior transition options.

 

These 10 Steps Will Help Insure Successful Deal Integration

In the world of M&A, virtually everyone everywhere focuses on and talks exclusively about the acquisition. Research, diligence, negotiation, pricing and asset purchase agreement terms and strategy.

For most, it’s all about the hunt.

Ironically, the hard work—and the make-it-or-break-it aspect of every deal– is successful integration.

The integration process, if not handled properly can be a field of land mines or a ticking time bomb. The potential for trouble, mistakes and obstacles is endless and infinitely variable.

Many, many deals that go smoothly on the front end, collapse and fail on the back end during integration. Most often, the reasons have a great deal to do with arrogance, ego and personalities. That’s true on both the buyer side and the seller side. However, most often, it’s a buyer attitude of we’re right, you’re wrong and it’s my way or the highway.

 

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So, how do you reduce the chances for an integration melt down?

  • The first and most critical step is for the buy-side team to begin the acquisition process with a deal team. Assemble a team of department heads representing all key parts of the company including senior management (preferably the CEO or at least the senior division executive) HR, Production, IT, CFO, senior sales and/or marketing, Operations, Digital, PR, etc.
  • Have the deal team review and sign off on the NDA so they know what the confidentiality guidelines are that they will be working under. Then, provide them with a copy of any deal book or Offering Memorandum on the business for sale.
  • Assign each member of the deal team with the job of conducting diligence in their area of specialty or focus and make it clear that they will need to develop the integration plan for their department or area of authority and responsibility.
  • Schedule mandatory and frequent meetings with the entire deal team and require each to report on diligence progress and integration strategy for the entire team to hear and learn from. It is absolutely amazing how often it happens that one department head presents a report on diligence findings and integration plans that affect another department in a way that no one would have expected or could have anticipated. But, without that cross department knowledge in advance of the deal closing, major unintended expenses or problems can occur.
  • Senior management should repeatedly drive home the fact that the deal team is charged with the job of identifying processes, programs, strategies and tactics that the company being acquired does better than the buyer. The message should be loud and clear that it is not a case of everything we do is right and everything the seller does is wrong. The buyer team should also be working to identify key talent and key knowledge keepers in the selling company as well as ways to retain them.
  • Include the diligence team in as many face-to-face meetings with the seller’s management team as possible. The more they get to know each other and understand their counterparts as people and managers, the smoother the integration process can go. People begin to see people rather than the amorphous business.
  • Develop and complete a very detailed integration plan of almost military precision. It must include a very specific time-table that has been established and vetted well before the deal closes. This plan should address every business discipline and department.
  • Once the deal is done, communicate like crazy—at least daily in the first few weeks– with all employees about what has happened, why and what the future plans are for the merged businesses. After all, even employees on the buyer side will be nervous. There is always speculation about what any deal can mean for them.
  • Manage by walking around both the buyer company and the seller company. Ask questions, shut up and listen. The rumor mill runs wild during the first critical months of any business integration. If not addressed fast and specifically, they can become a cancer on the business. Again, communicate from the top with great frequency and specificity. Repeat the questions heard and answer them for everyone in open communication across the merged company.
  • Continue to hold deal/integration team meetings for at least 6 months after the deal is done. Make attendance mandatory for every deal team member.

Even with this seemingly simple integration process, there are no guarantees that a deal won’t collapse for unanticipated reasons. But, a planned, organized, disciplined process that assigns responsibility and ownership to a team dramatically improves the odds of success.

Note: If you have an interesting and/or educational CEO story of Head Noise caliber, write to me at cbishop@capitusgroup.com. I’d love to speak with you and share your story in my Head Noise blog. You can tell your story either on the record or, without attribution.

Cameron Bishop is a partner with The Capitus Group. The firm provides comprehensive business value enhancement and transition strategy solutions. Partners and Advisory Directors comprise an experienced team of business professionals who have successfully owned, run, grown and sold companies. Capitus utilizes proven value enhancement and risk reduction techniques to enable superior transition options.