The Chemistry Lesson
Catalog-industry pro Arnie Cohen hoped to buy J. Peterman Co. when he visited its founder. Instead, Cohen ended up working for him
Sometimes things don't go as planned. In the spring of 1996 former J. Crew executive and wanna-be company owner Arnie Cohen made an unsolicited bid to buy J. Peterman Co., the panache-drenched clothing cataloger, which was then enjoying growing notoriety--thanks to Seinfeld --but was suffering losses and flat sales. (Most Seinfeld viewers never even realized they were watching a parody of a real company.) Founder John Peterman turned Cohen down, but he liked their talks. So the two kept talking. For a year. (The "yearlong tryout," they call it.) And they clicked.
In mid-1997, Cohen officially joined the company he'd tried to buy--as chief operating officer to Peterman's chief executive. And today the 400-employee company is extending its brand by opening retail stores and issuing auxiliary catalogs, all part of a campaign to reach $90 million in annual sales by the end of 1998. (Sales in 1997 were $65 million.) If all goes well, Cohen is expected to succeed Peterman as CEO.
How did the hookup happen? Inc. articles editor Susan Greco visited the two men at J. Peterman Co. headquarters, in Lexington, Ky., and asked.
Cohen: I approached him with a magnanimous, wonderful-with-a-capital- W offer.
Peterman: It was the most convoluted, complicated offer I've ever seen.
Cohen: John had a value in mind for the business, but from a strict, rules-of-the-trade-financial transaction, getting to that value was difficult. We created an aggressive deal that was reasonably complicated. I did get it on two or three sheets. But I want to stress it was a wonderful offer.
Peterman: I said to myself, "The offer sucks, but I like Arnie."
Cohen: He never used that word with me.
Peterman: So we just continued...
Cohen: In the course of the next four or five months, we talked collegially about how to move the business along. I made a couple of recommendations. Much to my shock, he started implementing them.
Peterman: I thought he was right. I don't care whose idea it is. I wasn't trying to impress Arnie. But as we kept talking I was pretty sure I wanted Arnie in the business.
Cohen: He didn't tell me that at the time.
Peterman: We sat down in the beginning of January , and we made a deal.
Cohen: He asked, "How can I get you to come work for us?" My response was, "I'm not interested in working for somebody." I wanted to be an owner, not a wage earner--even a highly paid one. At the end of the day, wage earner and highly compensated wage earner are the same thing; you don't get the true return for the value you create. Plus, the part about moving my family to Kentucky was tough. I have three boys who are used to the East Coast. But eventually, John and I met in New York. The whole negotiation took an hour and 20 minutes over lunch. We shook hands, and that was it.
Peterman: The equity part took 15 minutes. I knew what equity he'd been promised in some other deals, and I upped it. Most of Arnie's equity came out of mine. I don't regret it for one second.
Cohen: We have a counseling relationship. I can't think of one experience where John told me to do something I didn't already see or want to do. Has there been there any?
Peterman: Well, there's one thing, but you haven't listened to me: your cowboy boots.
Cohen (sheepishly): Well, there is that....But I feel John is my partner. There's never a moment I don't internally recognize that I work for him. Often he tells people that I report to him but that he works for me. That's like the best partnership you can have. That's how things hum.
Peterman: I don't feel I've given up control. Arnie has gained total credibility with me. I know about things in the process, not after the fact. I'll tell you what my job is: it's to make sure Arnie succeeds. My job is also to make sure the vision remains as it should be, that we continue to build the brand in the direction we have agreed on.
Cohen: The brand has a value and an image that's not to be tampered with. That's a lot of what we talk about: Is this Peterman?
Peterman: I got another offer last March. I thought about it for about 15 minutes. Arnie advised me to take the money and run. "You have 20 other ideas," he said. "Go on and do something else."
Cohen: This was a bona fide offer from people with incredibly deep pockets and experience in the industry. The payback to John was immediate and definite. I said, "It hurts me, but as your friend and your partner I'm going to counsel you, take the money and go, because it's a lot of dough. You've earned it."
Peterman: And I said no, I don't want to sell. I'd already decided the business wasn't going where I wanted it to go. I knew I needed someone who knew more than I did about how to get there. I made that decision before Arnie made his offer.
Cohen: A wonderful offer. At that time, I wanted to run the company, to control the company. I think it's worked out better this way.