Just over ten years ago, I sold my shares in the hi-tech business I had co-founded, and stepped out of the founder-CEO role. Recently I asked the buyer (who took over as CEO) to look back on the time of negotiating my departure and his takeover.
Since then he and his team have taken the business to new heights, leaving me filled with joy to see “my baby” thriving in a difficult commercial environment.
Deal making “to the limits of your own creativity”
So I asked him how he did it: getting a founding owner-manager-CEO to go peacefully? The secret, he said, was “do your research thoroughly – and then back yourself. The only real limit to deal making is your own creativity.” What I see is that he did that. Every time he figured out something I or my co-founding partners wanted, he came back with an adjustment to the deal that honoured that need. Yet every deal he offered was also smart and good for him. He knew – as I know now – that when owner-manager-founders leave, there has to be a discount on the share price.
There is real risk that the business value drops when its founding spirit moves on. And what he bet on – and won big on – is that there is real opportunity to create new value from the fresh approach of new leadership. This is something the wider market can’t be sure of. But the new leader can, as my successor so correctly did, back himself.
Keep your focus on what the owners really want
What my successor did brilliantly (while continuing to keep an eye on his own interests) was to maintain a diamond focus on what the business owners wanted. He kept digging, and he didn’t take our word for it. He used every signal and channel available to deduce our needs. At our recent lunch, he shared some of the top concerns he identified, and how ten years ago he was constantly juggling to figure which needs were really our top concerns:
- New ideas for the business?
- Cash for the departing CEO?
- Cash for the other shareholders?
- Investment in the business?
- The ultimate legacy of the founders?
Translate needs into numbers
As I look back on those days, what I think the person who bought my share of the business I co-founded did particularly well, was to translate his insights into our needs and wants into hard numbers. He juggled share prices, options, profit warranties and strategic vision with remarkable dexterity and wisdom beyond his years. In the end I believe he made a deal that fairly benefited the departing founder-CEO, the business, the remaining founders and himself.
And there is a lot for him to be proud of!