Buying a Business

One day in late spring I answered a blind box ad in The Wall Street Journal. It was for a food-service distribution company whose location was listed only as "mid-Atlantic." I had answered several of these vague-location ads and discovered that mid-Atlantic meant anywhere between Richmond and Philadelphia. It turned out that the ad had been placed by a broker and that the company in question was located in New Jersey. However, the broker sent along capsule descriptions of four Washington-area businesses for sale. One was an access control/security company. Sales were near $2 million; pretty good cash flow; the owner was retiring; it was selling for slightly above book value; it was "highly leverageable." I told the broker, Lauren Finberg, I was interested. On Wednesday, May 24, I met her in a Denny's restaurant near the company's offices. The owner would join us in a little while, but Lauren first wanted to size me up and give me a chance to go over the information package on the company. The narrative section was a little weak, but there were two years of financials from the accountant (not a bunch of numbers taken apart and put back together by a business broker, as was usually the case). We chatted about the owner, Peter Klosky, and it was obvious that Lauren genuinely liked the man. I liked Lauren and appreciated her intelligence, something I had not found in abundance in her industry.

Peter Klosky joined us at the table. He was a grandfatherly type with a mass of unruly white hair, a big smile, and a gentle manner. He looked all of his 65 years. I had no trouble believing that he was ready to retire. He told me that there was nothing wrong with the company that a little salesmanship and marketing muscle couldn't cure, that he'd gotten a little lazy about all that the past couple of years. Peter believed his people would stick around if he asked them to do so. He said the business was fun because there was something new every day. He said he'd tell me anything I wanted to know.

I asked Peter when I might see the company. He was nervous about that and said he really preferred that it be a Saturday and that I should pretend to be a neighbor coming over for a visit. I suggested that I bring along my wife and our two-week-old baby. Who would ever believe that this was a potential buyer coming to scope out the place?

It was a rainy, muggy Saturday when Judi, the baby, and I pulled up in front of the offices of Automatic Door Specialists. The building was too ugly to qualify as nondescript. It was a one-story structure painted industrial tan that had obviously been a retail establishment in a former life -- it had plywood where a couple of storefront windows used to be. I thought it looked like a dry-cleaning business. My wife shot me a look that said, "You've got to be kidding."

The one remaining window hadn't been exposed to Windex in years. But this was definitely the place. Peter Klosky answered the door and led us inside. I had never been in such a dirty building. The reception area was lined with filing cabinets circa the 1930s or 1940s. The walls were filthy and obviously had not been painted in a decade or more. As Peter Klosky led us into one work area with three desks, I noticed the metal ashtrays left overflowing, the coffee cups, the papers scattered haphazardly around, the desks piled high with parts, files, and notebooks. Judi looked around desperately for a spot to put our daughter's car seat. From the look on her face, I could tell she was terrified to let anything close to the baby touch any surface.

This is a mistake, I thought. Any positive feelings I had about the company vanished instantly. I knew I couldn't work in a place like this. As Peter gave Judi some background about the company, I tuned out and began thinking about other companies I had seen and where each potential deal stood. When Judi announced she had to nurse the baby, Peter took me on a tour of the shop. It was horrifying. Piles of steel, aluminum, and wood scattered about. Some benches with tools. Shelves stacked with pieces of equipment with yellowing tags that said "bad" or "rebuilt" (when? I wondered) or "tested/OK." Boxes of old files. Parking gates that had been crunched by trucks. Bags of cement. Pieces of broken glass. Overhead were steel supports (the kind that hold up a dropped ceiling) piled high with aluminum, pipes of every shape and size, old carpet. The parts section consisted of hundreds of cubbyholes stuffed with widgets, gizmos, screws, bolts, wire, gears, and things that had been stashed there temporarily -- 20 years before. Yes, this was definitely a mistake.

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