* * *
INC.: Do you all feel differently about money now -- having a lot of it all at once?
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WURTS: People who haven't sold companies think that you create a tremendous amount of wealth the instant you sell. But you've built up this wealth all along. All it does is change the value from one form to another.
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MORGAN: You're already making a lot before you sell your business, or you wouldn't be able to sell it.
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WURTS: I felt simply that I was more liquid. In fact, I felt poorer, because I wasn't going up in value. When I was running it, I thought I was getting more valuable every year. After I sold it, it was a fixed number.
* * *
GOLDHIRSH: For me, it was anticlimactic. After the deal was done, the funds were wired, so it wasn't even money. It was an electronic signal, like looking in an oscilloscope. It's not like somebody shows up with a briefcase.
* * *
KRAVETZ: I think of material things differently now. The odd thing is, it's a more conservative outlook. And I can't tell why.
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WURTS: I got rid of my Porsche! I had a Porsche before I sold, and bought an Audi 5000 Quattro that I could drive in the winter, and then I got rid of it and bought an Audi 90.
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MORGAN: That won't go down in the annals of conservatism.
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KRAVETZ: Once you know you're wealthy, you find there's no need to express it. The motivation to spend fades away.
* * *
INC.: Jay mentioned that he had no models for selling and therefore didn't for a while. How did the rest of you determine whether to sell or to go public?
* * *
KRISS: We tried to go public. We had our final drafting session on October 19, 1987! A secretary came in and announced the Dow was down 300 points. Obviously, we didn't go. The only other option was to sell the company. We hired an investment banker and made it known we could be bought.
* * *
INC.: Did the sale price ever recover?
* * *
KRISS: That's hard to answer, because of the accounting of the deal. It was a purchase, not a pooling of interests. If you factor in all of the advantages to structuring the sale that way, we sold for a P/E of about 18, which, for an emerging growth company after the crash, wasn't bad.
* * *
MORGAN: We sold for about 14 P/E. The stock fell apart afterward because there was so much overhang from the new stock issued for my company that it raised holy hell with Dynatech stock.
* * *
INC.: They paid you totally in stock?
* * *
MORGAN: Yes. My sale was a pooling of interests.
* * *
WURTS: We did a stock pooling of interests, too.
* * *
INC.: It behooves you in that case to make sure the buyer knows how to run your company -- to keep you rich until you can sell the stock.
* * *
WURTS: It's very scary. You've sold your company but you haven't sold your company.
INC.: Then why undertake a pooling of interests? There are SEC restrictions.
* * *
WURTS: It's a big tax advantage. In a software company, you have few assets; what you sell is goodwill. If it's not a pooling of interests, the buyer has to put it on the balance sheet as goodwill and write it off over a period of years. With pooling, however, there's no tax consequences.
* * *
MORGAN: And for the seller, it's like going public and instantly having a trading market for your stock.
* * *
WURTS: Sometimes there are restrictions in the deal, as well. We agreed we wouldn't sell more than 20% the first year and 25% the second. After that, we were unrestricted.
* * *
MORGAN: On the assumption that what entrepreneurs screw up most is the selling of their companies, I went to an investment seminar where 600 financial types and presidents got up and presented their companies that maybe were going public. I wanted to hear how they described things, what values they put on them. I sat in the audience and thought, how can I compete -- listening to them, each company was going to be as big as the gross national product by the time it was 10 years out. I knew then that I would never run a public company.
* * *
WURTS: Being public is like signing up for enlistment in the Army: you keep agreeing to five more years. You can't get any money out, because when you sell as the president of a public company, you discourage everybody else. Going public is the way if you're desperate to get a little money, but really want to end up keeping the company. Or if the company itself needs the money. Ours didn't, so a public offering wasn't a good vehicle for us: we couldn't get enough out.
* * *
INC.: Is there a postpartum depression of a sort that hits after you've sold?
* * *
MORGAN: It's painful -- that's one way of saying it. People don't change quickly. Do not expect to be different in a week.
* * *
INC.: Not even if they do something dramatic, like sail around the world?
* * *
MORGAN: In retrospect, the problem arose after returning. Returning was extraordinarily, excruciatingly painful. Suddenly I was going nowhere. At least when I was sailing, I was making progress toward a goal -- 90 miles, 200 miles, a day. But I didn't know where I was going when I came back. Nowhere was where I was going.
* * *
WURTS: I was envious when I read Dodge's book. Here's a guy who had a company, sold it, got the money, and then went right on to do something he wanted to do. Perfect! Whereas I had dumped myself out with nothing to do. Hearing that, I'm not so envious.
