Wednesday, January 13, 2010

Mergers & Acquisitions

Back when I was working on my MBA, I took a class called Mergers & Acquisitions. It was one of my favorite classes (next to ethics). The entire class was a project. Half the class on one side, half on the other.

The goal, to take our two companies and come to a deal.

At the end of the quarter, we didn't have a deal. At the time, I didn't really think much of it. In my professional career, I've been through several mergers. I've never orchestrated the mergers; I was just a playa.

I own a company. We have cash. We want to find an investment.

Another company, needs cash, needs help.

The two together would be very good.

Of course, there are complications. Over the past two days, I have been going over different situations in my head. There's been something, some little nugget that is bothering me about this whole situation, but I can't put my finger on it.

So, I set it all aside and went swimming.

Warm Up: 400m
move from soleprop to incorporating both companies, profitably of B is alot lower than A, behind in rent, invoices, hell all payments, cash flow, buying power, ownership....shareholders, how to split, value of existing business, systems.....

oh hell systems of all kinds.

That had to be the fastest 400 I've ever swam. (not really but I

300m on 1:30 rest.

even split? responsibilities, decision making, buying, finances, who does what, responsibilities, retirement, is it fair? what are the expectations? city renovation, costs of improvement, employees, health insurance.

I'm not there. What is it? What is bothering me?

2 x 150m on :45

pull, glide, pull, the water feels so nice today, it's just there, letting me glide on through.

corporation, no access to money, corporation, executive staff, no access to money....

no access to A has to fund all improvements until B can get up to par. cash flow. no access to money....sole-prop won't step down....that's ok....responsibilities...

that was a fast 150. pull feels strong. where did all the other swimmers go? pull, pull, pull, rotate, easy.

That's's psychology not finances that's bothering me. owner of B will not step down, what will his responsibilities be? how will he figure into decision making? What is an appropriate salary? Will he be ok with taking a salary? No more pulling money out of the cash drawer. Loss of identity.

4 x 75 on :30

time is going by fast today. sometimes everything just comes together in the pool. stroke, pull, rotate, breathe, no thought, just let your body do what it needs to do.

lower profitability, not negative equity but certainly not as high as the owner thinks it is. Ego.Ego.Ego. 24 years in business. can we entice him....will it take enticing? He doesn't do much actual work now. exit strategy, how to replace, longer an "owner" but with a stake in the that a negative or positive?

100 easy

We have to proceed carefully. Clearly, this business is his identity and "retiring" means giving up that identity. He needs something. He needs a job to go into everyday. But, he doesn't really want to work. He's old. He has health issues. He wants out but doesn't know how to go about it. I wonder if he would be open to an increasing monthly income over time, once we are able to start making investments in the company, improving the efficiency of sales and inventory management, increase our buying power, advertising. It will all work, but it will take a little bit of time. He can stay in the store, wander around, give input into buying, etc.

Will it work?