Do Your Research, Control the Setting
I am always surprised when I come across people who deal with other people on quite important things and haven’t done their research… for example, there are a lot of insolvent companies out there, especially in the digital world, yet firms regularly put them in critical positions in their supply chain.
But I digress. I thought I’d share with you a story from my days in partnership which illustrates the value of doing your research.
I had a client who wanted to buy his fellow directors out of their manufacturing business, which wasn’t terribly successful. Having done all the work we wanted to do on the business review, we decided how much it was worth and agreed a negotiating strategy and offer.
I then did a bit more research. I made enquiries about the fellow directors (lifestyle, family issues, age etc etc). The idea was to get as much knowledge as I could about their capabilities and likely motivations. I knew they’d be relying absolutely on the advice they got from their accountant, so I did the same regarding him. That was gold dust. I discovered that he went out on a Tuesday night every week and drank a great deal.
I arranged the meeting to discuss the buyout for 8 am Wednesday morning. We controlled the venue and seating. I took the ‘power chair’ and my client sat to one side, so I could kick him under the table if need be. We did NOT serve coffee. They arrived just before 8. At about 8.10, the accountant rolled in, looking rather the worse for wear. He opened up his briefcase and sat down. He took out a blank piece of paper. I knew he was either brilliant or totally unprepared. It looked a hell of a lot like the latter.
My client led the intros and turned the meeting over to me. I went straight to the point (after kicking my client to warn him something was coming). The offer was made – half what my client and I had agreed between us to offer, take it or leave it.
They looked at their (clearly unprepared) adviser, who nodded vacantly and that was it. They took it. We all shook hands, instructed the solicitors and (crucially) went round the factory and told the staff….no backing away now!
The irony is that their accountant got paid for costing them tens of thousands of pounds and I’ll bet that to this day he and they think he did a good job. In case you think this is self-aggrandising, I’ll freely admit I made a major faux pas too – I failed to get a contingency fee agreement. Oops.
There is only one message here. Had the extra (know the other side) work not been done, my client would have bought the business for a lot more than he did.
There’s no real substitute for doing your homework. An awful lot of what is important isn’t in the numbers in cases like this…it’s in the people.
Joe Reevy, is a director of business development automation company www.crosselerator.com and former managing director of www.Legalrss.uk.