The New York Times reported on a “little-noticed court ruling in December (2020).” The ruling was against the former board members of the Jones Group, an ownership group of apparel brands including Gloria Vanderbilt, Anne Klein and Nine West. In 2014 the Jones Group sold to Sycamore Partners in a highly (one might say overly) leveraged deal.
The court ruled the “officers and directors had better think twice before agreeing” to deals with this type of structure. Duh! If it sounds too good to be true it probably is. It’s why good bankers (for our clients’ size of deals) won’t let a buyer have the bare-minimum debt coverage ratio. There needs to be a cushion because “things happen” and one of the best and worst things is fast growth. Growth sucks cash and that’s where the cushion comes into play.
Here are some related situations where the best:
- Business buyer has the whole package including price, abilities, relationship building, and more. As many in the buy-sell world know, the best buyer is not always the one offering the highest price.
- Business to acquire is not always the one that’s the best deal. It’s the company the buyer can grow, add value, and see themselves going into every day with a smile on their face.
- Customer doesn’t always pay the most. But they’re loyal, work out issues, and refer others to you.
- Job isn’t necessarily the highest paying job; it has the whole package including culture and career advancement opportunities.
- Employee to hire isn’t the one who will work for less. It’s probably the one who expects, and is warranted, a higher salary because they’ll have higher productivity.
It comes down to looking at the whole package, not just the shiny stuff (like the money).
“If I had to live my life again, I’d make the same mistakes, only sooner.” Tallulah Bankhead
“It’s funny. All you have to do is say something nobody understands and they’ll do practically anything you want them to.” J.D. Salinger