When we sold ion interactive, the scuttlebutt was that we were ‘retiring to Nashville’. That couldn’t be further from the truth, but circumstances contribute to misinformation that runs rampant during and following an exit. This post is about managing the exit process and the information that swirls around it—before, during and after the fact.
Anna and I had some double trouble to deal with in terms of managing information around our exit process. We had decided the year prior to relocate to Nashville for quality-of-life reasons. Nashville is an energized place and, as a family, we had decided that’s where we wanted to be. And, the move had to be timed durning the summer prior to our daughter starting high school. (Anyone who knows Ella knows that she is a serious, self-motivated student who would never want to relocate during her high school experience.) It was a move 18 months in the making that far preceded ion even hiring investment bankers. So our big move was on the calendar for July 2017. Period.
Managing the Exit Process and Narrative
Our lead-up to hiring bankers included a near-miss acquisition that was timed for later in 2016. That LOI ended after groundless buyer price re-trade attempts, but we really did think it was going to happen. As a result of that exclusive, we tabled all other progress through Q3 2016, despite having a lot of other inbound interest. Once we got burned on that near miss, we re-engaged with other players, but decided we also needed bankers (clearly).
Diligence is Distracting
For those of you who haven’t yet experienced due diligence, it’s distracting. No matter what I said or did, it was a time and attention drain and my teams noticed. It was also a time and attention drain for others in the company, and their teams noticed. But only those in senior leadership knew why they were distracted. And even for them, the line was that there were parties considering investment in the company. This was completely true, but also incomplete. In hindsight, that framing was one of the smartest decisions we made regarding that 2016 near miss. Even senior leaders lose perspective and understanding in these processes (as we saw later on). When we disengaged with the 2016 buyer, it was relatively uneventful internally.
Q4 2016 was easier from an information management perspective, because there wasn’t much to spin. I was refocused internally and it showed to employees and the public. The only real distraction then was the process of choosing a banker to help me field and handle inbounds (and perhaps engage in a more formalized process). But the banker selection process is private, quiet and unobtrusive. At least until you get into pre-book banker diligence. We hired our bankers just before Christmas 2016.
Bankers for Sanity and Momentum
Going into 2017, I was once again fielding a lot of inbound interest in the company, but was beginning to punt to the bankers (wow, what a relief). But, I was also freshly burned and feeling like I needed to refocus internally after wasting a bunch of energy on a bad buyer. Quite frankly, my performance had suffered and I wasn’t happy about that. My teams sensed that I was back with them more fully. Again, they didn’t know why, but they knew my attention was back on our collective performance. That however, slowed my early banker responsiveness (bad idea). As a result, pulling the book together took a few weeks longer than it should have. I’d pay dearly for that.
Once the book was done, the weight began to fall back on me to participate in calls. I love that part, so that was great. But everything’s a tradeoff and the distraction showed (again). Senior leadership smelled something in the air and we (again) framed it as investment interest. At this point, they also knew we had hired bankers, which amped up everyone’s radar.
Leadership in the Know
Distracted leadership is bad. One of the biggest deal killers in M&A is performance dips in the company being acquired. Even little blips are fodder for buyers to question, slow down or even re-trade a deal. Fortunately, we didn’t end up in that boat, but that wasn’t because of steely focus. Leadership was distracted for months, even with the benign ‘investment interest’ framing. In retrospect, it was too early for even that. The process is too uncertain that early to involve too many operationally responsible people. They need to stay focused on the trajectory and P&L of the business, not an uncertain outcome from a roller coaster process.
Emotions are much more volatile than business. Once emotions get involved, bad things happen. It gets personal when it shouldn’t, and only the most mature people can keep that part out of their minds. Once ‘investment interest’ switched to ‘buyer interest’ emotions came into play for senior leadership. We let this cat out of the bag too early (again). The questions started flying— ‘why now?’, ‘what’s next?’, ‘what about me?’, ‘what about my team?’, ‘what about you? what are you doing?’. What I didn’t anticipate was that truthful answers to these types of questions may not be believed—even by people I had known for years and with whom I had always been honest. The most distrusted answer was ‘we don’t know (yet)’. Big problem was that it was also the most common and truthful answer. Senior leadership started pontificating. That’s not good.
During on-site buyer diligence, the wider company understood the ‘potential investor’ positioning. Again, this was both true and necessarily incomplete. This was already an uncommon notion as ion was bootstrapped and everyone knew it. So, even that framing raised a bunch of eyebrows, but everyone stayed the course.
Remember when I said I paid dearly for the lost weeks at the beginning of the process? This is where… our process began to push towards the summer—and our immovable move to Nashville. This was problematic on a host of levels, not the least of which was the exacerbation of my personal distractedness. It rose to an all-time high as we were traveling to look at real estate, selling our home and executing a full-on diligence process. Everything was coming to a head at the same time. Mayhem. Chaos. Madness. And, it was excruciatingly hard to continue to run the business. Remember also, ‘no blips’ and the constant reprise from our bankers… “time kills deals”. It was summer and we weren’t closed yet.
I will say that I believe the company thought that Anna and I were primarily distracted because of the Nashville move. That wasn’t the case, but that’s how it looked. We moved in late July.
We thought the deal was going to be announced and closed in August. We flew back to Florida, but didn’t get it done. We flew back to Nashville, and then…
Inconceivably, one more major variable came into the mix… hurricane Irma. Once a deal is done(ish) and bankers, lawyers, accountants, buyers and and sellers are all on board, a train starts rolling to closing. At that point, it’s very hard to control the pace of that train. Everyone on both sides of our deal fully intended to be on-site, in person for the announcement of the transaction. But our train was pulling into the station literally on the day of a hurricane warning. No one could fly into South Florida (you’d never get back out). My parents were en route OUT of the path of the storm up to Nashville. And, all of our beloved employees were frantically prepping for one of the most powerful hurricanes on record, so they certainly weren’t at the office. But our train was pulling into the station. Irma be damned.
None of this helped us manage the narrative.
Sadly, we had no choice but to host a webinar all hands to announce the acquisition. Unwittingly, we gave credence to a rumor that we had left everyone to retire to Nashville and that the sale of the company was part of that master plan. Of course, that couldn’t be further from the truth. Yes, we exited the company, but certainly not to retire (we were back at work the next Monday morning). We left the company we built in the capable hands of a buyer intent on growing it.
Be Careful with Transparency and Timing
What I learned from all of this is that it is a bug and not a feature to open up about a process to a wider group. I realize this may be an unpopular view. But, I’ve seen the ‘what if’ machine and it’s neither productive for the company, nor healthy for the pontificator. There are too many variables and it is in everyone’s best interest for the focus to stay on the job of keeping the company successful. And, no matter how truthful and transparent you are, misinformation will run rampant in some 50/50 state that’s nearly impossible to parse. For example, I am in Nashville, but not even slightly retired.