Given his doubts, you might wonder why he was willing to invest so much of his time and his firm's money in trying to make the deal happen. When I asked him about that, he said that the chemistry between us played a major role. "This deal got done on your balcony during that party," he said, referring to a dinner party my wife, Elaine, and I had given for Chris, his wife, and two other couples. He and I had broken away for about 45 minutes. "You know," he said, "when we talked about where we came from, who we are, how we relate to our families, that sort of thing, that was key. In my experience, you can't do a big deal like this one unless the principals have a relationship. There's kind of a line, and to get across that line there has to be trust. You have to find out early on whether you can relate to somebody closely enough to do a deal with them. On the balcony is when I found out we shared a lot of the same values."
But wasn't there also a compelling business reason to go forward? "Oh, sure," he said. "Just walk into your warehouse. I don't care how many warehouses you've seen. You go in there and look up and you think, 'Wow!' That sight will close the deal every time."
It's the boxes. With every one of them comes a revenue stream. "Each box has an average life of 18 years that it's going to generate revenue," Chris said, "and that's just for sitting on the shelf. If the customer wants to get the box off the shelf, there's a whole component of service revenue and then removal fees if the box is permanently taken out. And records storage is as close to a recessionproof business as you'll find. All the private equity guys are looking for that type of business right now because they're convinced the economy is going to turn sooner or later."
It wasn't just the boxes, of course. "Your readers should also know that having audited financials was a very big thing," Chris continued. "In the deals that we do, 5 percent of the companies have audited financials. It's just not something they do. Your company has them. Business owners need to understand that even though it costs a lot to have audited financials, the money spent creates tremendous value."
I asked Chris what else had been important to him. "You have a very mature business," he said. "The principals have replaced themselves in their roles. That creates value, too. If a business can't function when the owner isn't there, that isn't a good value proposition for the buyer. It's risk." So I guess he's happy to get the business as long as he doesn't have to keep me around.
Anything else? "Well, you're lucky you have your partner Sam [see "Sam and Me," June 2006]. I mean, the guy knows every detail about the business, and he can readily provide any financial information we need in a very sophisticated way. He knows exactly what's going on. That gives buyers great comfort."
I had to take a call at one point and left Chris alone with my co-author, Bo Burlingham. "There's another thing," Chris said when I was safely out of earshot. "The culture. I've seen transactions where we're not even allowed to set foot on the property during business hours until after the deal is done. None of the employees know a thing about what's going on. That speaks volumes about the relationship between the owner and the employees. Personally, I don't do those deals. A business with a culture of trust--where the people who own and operate the business have a great deal of interest in the welfare of their employees--has real financial value. It's just a much better business environment. Go look at his trucks. Look at how people treat things. Look at how they treat one another, how they deal with the customers. Look at the wear and tear on everything around here. People care. Every penny matters. It is an atmosphere of respect, a culture of respect. But I wouldn't tell Norm that. He's got a big enough ego as it is."
So there you have it, advice on how to get a great deal selling your company from someone who buys them. Unfortunately, we still have some work to do, as I was reminded when I was having dinner recently with some young guys from Goldman Sachs (NYSE:GS), which is handling the debt portion of the financing. I asked one of them how many deals he and his colleagues had worked on. He said they'd done about 35 in the past year. "One thing I've learned," he added, "is that it isn't done until it's done."
"That's right," said another member of the team. "Last week, we were eight hours from closing a deal, and we walked away from it."
More recently, I ran into a problem with the guy who runs the company that my company would merge with. He wanted to change one of the contract terms we'd already agreed to. I refused. After a heated discussion, he left my office in a huff.
I guess Chris is right. I still can't say for sure that my businesses are going to be sold, but I've made my decision--and it should be official very soon.
