It’s Not as Easy as “Show Me The Money”

By John Herubin, Managing Director

Tom Cruise uttered the famous line, “Show Me the Money!” when portraying a sports agent in the 1996 movie “Jerry Maguire”. His client (played by Cuba Gooding Jr.) was urging Tom’s character to focus on maximizing the cash compensation in his contract. It was clear that “the Money” was the only aspect of his contract negotiations that was important to him.

As investment bankers who have closed 300+ transactions over the last 40 years, we have learned that successful deals are rarely just about “The Money”. All of our clients have unique criteria for a successful sale and it is our job to balance the client’s qualitative factors throughout a sale process.

Two recent experiences highlight this observation.

We represented a business owner that was 50 years old at the time, unmarried, and had a desire to pursue interests outside of the business. He did not need the proceeds to retire comfortably.

We conducted a sale process that produced 20 offers with 6 premium offers relative to his target selling price. After meeting with the premium buyers, one submitted an offer well above the other bidders. Despite the significant potential financial gain, our client was hesitant to accept. He indicated to us that he preferred one of the lower bidders. During the process he came to realize that his key employees had grown to become “like family” and he felt the highest bidder would not be the best steward of the business going forward. With that understanding, we were able to negotiate an acceptable albeit lower value with another bidder that would allow the key employees to be protected post-transaction.

Another engagement involved a second-generation business that did not have a clear successor. The business was the largest employer in the town where they operated. Our clients had significant wealth accumulated from their years of operation.

During our sale process the owners were concerned with maximizing value to further fund a number of charitable organizations they supported. Additionally, the owners desired a buyer that would commit to maintaining the existing facility and employees. Our process proceeded accordingly and resulted in a sale to a buyer who shared the same vision for the business – and community – as the seller. The sellers traded maximum proceeds for the assurance that the business, employees and community would benefit long term.

Much like the Jerry Maguire character, an investment banking partner must explore and understand the core needs and desires of their clients to determine the qualitative factors (i.e. stewardship, legacy, employees, community) that can also influence the quantitative ones (i.e. personal wealth accumulation, retirement planning, generational wealth). When these attributes are identified and properly communicated to buyers, the transaction becomes much more than just, “Show me the money!”

© Copyrighted by EdgePoint. John Herubin can be reached at 216-342-5865 or via email at jherubin@edgepoint.com.