On Wednesday, the telephone didn't stop ringing. I heard about another guy who'd sold his company to Nova and had an experience similar to Bob's and Harvey's, with Frank making new demands at the end. Chris called. And so did Nova's CEO, Mike Gold, who said that Frank had agreed to take the tax abatement issue off the table. "That's real nice," I said, "but it's not enough. He has to waive his veto in writing." When Mike called back, he said that Frank couldn't waive the veto without violating contracts he'd signed, and now he was putting the tax issue back on the table. "What does that have to do with anything?" I asked.
"Since you're raising a new issue, Frank thinks he should be able to do it as well."
I just laughed. "He doesn't get it, does he?" I said. "This deal is off as long as he insists on retaining his veto. There's nothing to discuss."
At some point on Wednesday afternoon, Sam came to me. "You know," he said, "it may really be true that Frank can't waive his veto power even if he wants to. He may have legal obligations to the people who put up the money for the deal. They might have made it conditional on him having the veto."
"Okay," I said. "So what?"
"So you might want to think of an alternative," he said. "I'm not saying you should, but--if you really want to do the deal--you might have to."
Sam was right, and on Thursday morning when Chris called back to confirm that Frank's lawyers wouldn't let him waive the veto, I was prepared. "There's got to be an alternative," Chris told me.
"Okay," I said. "I'll give you one. It has three parts. First, I want the whole board to come to New York for a meeting starting Friday at 8 a.m. at one of the lawyers' offices. Second, they have to stay in that room from 8 to 6 every day until the deal is done. Third, I want a check for $200,000 by 3 o'clock today."
"What's that for?" he asked.
"I've already spent more than $400,000 in legal fees," I said. "I'm not spending another dime negotiating a deal that's going to fall apart when Frank tries to hold me up at the end. That's how he works, and I won't stand for it. I'm willing to sit and talk with you, but you have to pay for it. You have until my staff meeting at 3 o'clock to get me the check."
Chris called back an hour later. "We agree to your three conditions," he said.
"Okay, good, great," I said.
"Except for one thing," he added.
"Wait, wait, wait," I said. "If you agree, you agree--no exceptions."
"We'll pay any additional legal expenses you incur at the end."
"No, you won't," I said. "When the deal falls apart, you won't pay anything. No. The answer is no."
"Well, that's the best I can do."
"Chris, you might as well mourn the deal. I started mourning two days ago. It's over."
At about 1 p.m., Mike Gold called. Now the plan was for us to meet without lawyers. "It won't cost you anything," he said.
"Yes, it will!" I said. "It will cost me another two or three days! This is already the longest deal in the history of deal making. Three o'clock. You pay me the money by then, or it's over."
The last call came from Chris at 2 p.m. "I have to ask you a personal favor," he said.
"Personal favor?" I said. "There are no personal favors in business."
"You have to sit down with me and my partner and Frank and Lane," he said.
"I'll only meet if you give me a check for $200,000," I said. "Let me ask you something. Why won't you or your company put up the money?"
"We can't," he said. "What if the deal doesn't go through in the end?"
"Exactly!" I said. "Nobody will do it because they know Frank! Listen, Frank's a good guy, a smart guy. I just can't deal with his negotiating style."
And I meant it. There was nothing wrong with Frank's way of negotiating. It wasn't my way, but it had obviously worked for him in the past. Of course, I believed it had worked only because of his veto, which I hadn't known about but should have. I had clearly failed in my own due diligence. True, I'd never heard of a minority board member having a veto, but that was just my ignorance. The next day, I saw a headline in The New York Times announcing that Sam Zell was getting a veto as part of his deal to acquire the Tribune (NYSE:TRB) publishing company.
I suppose I could also have blamed Chris and Harvey for not telling me about Frank's veto, but that would have been a cop-out. They had no obligation to tell me anything. Their job was to get the best deal for Nova. No, the fault was all mine. I hadn't asked enough questions early on about Nova's decision-making process. If I had known then about Frank's veto power, I would have spent more time with him at the beginning and probably concluded that he and I could never do a deal together, which would have saved us all a lot of time, money, and anguish.
Not that my employees were the least bit upset by this turn of events. The senior managers told me later that they came to the 3 p.m. meeting expecting me to announce another delay in the closing, which they had known was set for that day. When I instead told them that the sale was off, they broke into radiant smiles. "I guess I can keep my gasoline credit card," said Peter Gunderson, who oversees our operations.
"Oh, great, June is just around the corner," said Patti Kanner-Post, one of our key salespeople, referring to the end of our fiscal year. "I guess we're going to get our annual bonus after all."
Later that afternoon, I met with all of the supervisors in groups of two or three. They seemed equally glad that they wouldn't be dealing with new owners. Even Elaine, who had pushed to sell from the start, was comfortable with my decision. Indeed, she had given up on the sale before I had. Considering the difficulty I was having in getting our agreements down in writing, she had begun to fear how the employees would be treated under the new regime.
And me? It's going to take a while for me to process what we've been through. I've been getting a lot of calls from people who want me to do a deal under other conditions, but I think we'll need a considerable period of time before we're ready to make long-term decisions about the future of the company. Meanwhile, I'm just trying to figure out what I've learned from this saga. I'll have some thoughts about that in next month's column, which will be the last in this series--the last, that is, unless something else completely unexpected happens.
