Value is in the eye of the beholder

MoneyBlackHole

 

Value (not beauty) is in the eye of the beholder

 

Charlie (not his real name) was excited.

 

He had worked hard, taken risks, and been rewarded. Charlie had built a $40MM manufacturing business over the years through organic growth and acquisition. 

 

That was how I met Charlie. He became a candidate to acquire a client of mine, a niche manufacturing business that Charlie successfully integrated with his two other channels about a decade ago.

 

Charlie, and his wife, were ready for the next chapter. Some travel, some grandparenting, and definitely, some relaxing. At the helm, Charlie put his son, Tom, who had recently completed his MBA in business management. The next few years flew by with Charlie getting quarterly updates from Tom on his plans to expand and grow the business. They were traveling when the call came. It was time to go home and take care of some business.

 

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Things had gone poorly. That’s a very generous term. Disastrous is more complete a description. Since Charlie’s departure, revenues had fallen almost as fast as expenses had skyrocketed. Some key accounts had left after issues with prices and lead-times.

 

I would like to say that Charlie fought the good fight and persevered. When I got wind that there was trouble, I contacted Charlie and pleaded with him to let me re-home the division that he’d acquired through me. I knew that the right buyer would see the value and far exceed the auction returns. But the turnaround group that came in did what most turnaround groups do.

 

Convinced by his advisors that the best solution to his painful problems was a quick liquidation, millions of dollars in equipment were sold in a weak marketplace for pennies on the dollar. Charlie not only didn’t get a fair return on his life’s work, he lost his lake home, cars, and lifestyle that he’d spend decades building.

 

Add to that the pain and problems for his employees and their families – many had been with Charlie for 20+ years.  An orderly sale or partnering agreement with an ongoing business could have salvaged much. But most turnaround guys have a hammer and all they see is a nail.

 

From the sidelines, I’ve watched too many companies that could have found a new home or strategic partner and could have kept employees and customers in place with creditors far more satisfied than the quick answers provided by liquidation. The added value to all concerned is exponential.

 

The old saying goes... "Something is only worth what someone will pay for it"
So find that someone that sees the value.