On November 6 we* hosted our 10thanniversary “Getting the Deal Done Breakfast Conference” at the Bellevue Club. About 150 people heard about our featured topic of management buyouts & buy-ins from our panel and our presenters, Tom Varga, founder of CFO Selections, and Kevin Briscoe, CEO.
Tom and Kevin shared their experiences and feelings as part of Tom selling off ownership and giving up control and Kevin investing in the company and taking over its leadership. They were incredibly open. One might say it was “open kimono” time as they shared detailed financial information, their fears, and the results. FYI, Kevin shared with me prior to the start they wondered if they could fill 30-35 minutes. They did such a good job we had to stop questions after 60 minutes.
Our panel then discussed our thoughts and experiences with management acquisitions. And, of course, Marc had his annual prop, a statue of Zeus with the lightning bolt of tax, which he brought out to signify the exciting tax law changes from the recent tax bill.
Some of the insights offered by our panel included:
- Make sure management wants to take on the responsibility of ownership, and, most importantly, they are willing to sign personal guarantees (and if there’s a bank use their home equity as collateral).
- How to handle it when the business is too large for management to buy (using other investors).
- Financing options, the bank and more.
- What entity should the buyer’s firm be, especially if there’s roll-over equity for the seller?
- What the bank is looking for in both the buying team and the company moving forward.
- What’s the bank’s relationship with the buyers and will the buyers agree to guarantees.
- The industries most conducive to a management buy-out (construction and professional services top the list.
- How advisable is it for the founder to stay on in some capacity?
We had to hustle to end at 9:30 so all-in-all, a very successful event.
* Greg Russell – PRK Law, Marc Hutchinson – Hutchinson Walter CPAs, John O’Dore – Chinook Capital Partners, and Kit Gerwels – Columbia Bank
On November 13 I was part of a panel presenting at Seattle U as part of their Family Business program. Others on the panel were Julie Eisenhauer with Clark Nuber CPA, Jesse Ficks with Skis Painting, and Casey Schindler and Jake Licht with Baden Sports.
The focus of the meeting was “Value Creation” and it was a combination of Q&A, small group discussions, and audience participation. Besides giving overviews of our respective business we discussed:
- Strategies and tactics the operating company representatives have used to grow their business.
- Examples of how the two advisors have worked with clients.
- Measuring of value, i.e. it’s not just the dollar amount. This includes culture, life balance, passing the business on to the next generation, the quality of work, and keeping valued employees
- The challenge of change when you have longtime employees.
- Having a strategy and matching it to value drivers.
- The use of metrics, management reports, etc. to make decisions.
- The softer things like safety training and getting rid of bad customers.
- Knowing what’s important and what excites you.
In addition, one of the audience members shared how his company has made four acquisitions and how they were willing to pay more for companies with “their house in order.” In fact, he said one company received twice as much (multiple of earnings) as another because they had their house in order.
The bottom line, if you run a company as a business and not as a lifestyle, cash cow, or toy business you make out in the long run, both financially and emotionally.