We all make assumptions, often without realizing it. Why, after all, would we challenge something that everybody knows to be true? But unchallenged assumptions can cost you an awful lot of money, as I recently discovered.
Longtime readers of this column may recall the series we wrote from 2006 to 2008 about the sale of my document-storage company, CitiStorage. When I started the process, I decided I would accept bids from only financial buyers--that is, private equity firms of one sort or another--because I wanted our people to keep their jobs and our culture to change as little as possible. That was most likely if the buyer aimed to use us as a platform on which to build a larger document-management business.
I realized at the time that I could get the most money for the business if I were also willing to entertain bids from strategic buyers such as Iron Mountain and Recall Total Information Management, the two largest document-management companies in North America.
But I knew--everybody knew--how strategic buyers deal with companies they acquire, especially when the acquiree is a competitor. The new owner would fire most of our people and move our boxes into one of its facilities. After all, you buy competitors because you want their customers, not their employees.
In the end, I wound up selling to Allied Capital, a type of private equity firm known as a business development company. Then came the Great Recession. Allied was acquired by another business development company, and CitiStorage was part of the deal. Suffice it to say that my former company and its employee morale declined sharply in the following years.
I was aware that the new owner wanted to be rid of CitiStorage and would eventually sell it to a strategic buyer--and sure enough, on May 1 this year, CitiStorage was acquired by Recall. I expected the new owner to get rid of everything but the 4.5 million boxes, but it took less than 24 hours for me to realize that my assumptions had been totally wrong.
The day after the sale, the president of Recall North America and his leadership team came in and met with every single one of about 150 CitiStorage employees, including warehouse workers and truck drivers. His message: "Welcome to Recall. We're not planning any big changes right away. Your jobs are secure." Not only that; it turned out Recall's benefits package was even better than ours had been.
The president and his people met with me as well, because I still own the property on which CitiStorage is located. They emphasized that they wanted to have a smooth transition and a good relationship with their landlord. Spending time with the Recall people and watching how they operated, I wanted to do everything I could to help them.
As of this writing, the transition of ownership continues to go extremely well. Morale is higher than I've seen it in years. It's obvious now that I made a big mistake back in 2006 by not questioning my assumption about selling to a competitor.
Given what strategic buyers or competitors were paying for records-storage companies at the time, that assumption probably cost me several million dollars. More to the point, selling to Recall back then would have saved my former employees a lot of grief. And yet, I'm very happy that this particular assumption of mine proved to be wrong.