On the Fence About Engaging an M + A Advisor?
3.5 minute read
Contributed by Jay Jacobs, Founder and former CEO of Rapid Manufacturing
If I had a chance for a do-over on the sale of RAPID Manufacturing, the company I founded in 2005, one of the few changes I would make is to partner with an M + A Advisor earlier. My naivety on the question of “what value does a good M + A Advisor provide?” may have cost me money — and certainly added unneeded stress.
Working with Bigelow made a huge difference in our transaction after bringing them in mid-stream and I know their compensation was more than earned. We partnered with them after a strategic buyer had approached us, worked with us a little bit, and then said they were interested in acquiring us. At that point I knew we needed help — the acquirer was a public company and I felt we would get eaten alive from the things I didn’t know, but that I knew we needed to know! Indeed, Bigelow provided tremendous help but there were so many other areas where they could have helped more if we had engaged them to shape the liquidity event earlier. Perhaps the biggest was preparing RAPID for sale which would have taken many of the stress points out of the transaction.
One of the “ah-hahs” that came out of the acquisition for me was that RAPID was not fully prepared for sale. We had done some of the prep work, but as an Entrepreneur Owner- Manager, I ran the company in ways that were to my benefit and took shortcuts to avoid friction. These were not easily understood by outside investors, and this made the due diligence tough for ProtoLabs, our eventual next majority owner. The opaqueness made them question whether things had been set up and done in order to hide something. In particular, they needed clarification on two big areas which involved outside companies where I was a large shareholder. These areas, if we had had Bigelow’s guidance a year earlier, could have been clarified in advance so they were much easier to understand and accept. Instead, the lawyers got involved and we spent easily an extra six figures on legal fees for possibly un-needed negotiations back and forth.
Another area where it would have been helpful to have engaged with Bigelow before we were approached, was creating the opportunity to explore offers from other potential acquirers. Because we were documenting our financials and other materials on the fly in preparation of a Letter of Intent, we risked derailing the transaction if we pressed Pause and took the time to go to market to ensure the price we were being offered was reasonable and in line with the market. While I am happy with the resulting sales price, there is always the question of did we leave money on the table? Starting my conversations with Bigelow and having them guide a cleanup and preparation before we were approached would have given us options which we ultimately felt we could not explore.
As an Entrepreneur, my bias towards action blinded me to what I originally saw as potentially wasted inaction of teaming with an M + A Advisor early. The preparation process for being acquired takes time — and in reality, what I perceived as inaction is really action. Yet another stake in the ground confirming that preparation and structure provides freedom and gives you options.
Contributed by Jay Jacobs, Founder and former CEO of Rapid Manufacturing. Jay Jacobs is a parallel entrepreneur currently engaged in building Paperless Parts which enables manufacturers to more quickly and accurately quote a variety of manufacturing processes. He is also training for the Men’s National 400 meter invitation-only championships in 2019. Jacobs was the NH High Tech Council’s Entrepreneur of the Year in 2017.
What I Am Reading / Listening To
There are a few thought leaders—Dan Sullivan, Marty Seligman, and Nassim Taleb come to mind—who seem to be able to artfully capture and then affirmatively articulate thoughts that for me sometimes I felt like I only fleetingly had, just for a moment. Ever feel that way? So when you read them, you think “Ahhh…that’s a familiar insight. I observed that too; that aligns with my view of the world.”
Seth Godin is another one of those thought leaders. Honestly, he must have been listening in on our entire last years’ worth of discussion inside Bigelow and our decision to pivot our messaging directly to our EOM friends and clients. His book, This is Marketing: You Can’t Be Seen Until You Learn to See (2018), is a little book of philosophy, strategy, even epistemology of marketing but certainly not a “how-to” workbook. He strongly advocates the use of empathy, emotional connection, long-term relationships, and experience creation as sophisticated tools to tell the message.
Entrepreneur Owner-Manager Quote
“I am happily terminated”
-Jan Blomstrann, former owner / chairwoman of NRG Systems, Inc. on life after a capital transaction. See her story in a short video.
Contributed by Amanda Telford
When I owned a caramel manufacturing company, there were days when walking through the doors was like walking through thick mud. It might not have been in response to anything dire, and dread wasn’t necessarily the feeling creating the sensation. Sometimes, I was just tired. Running a business is hard.
But as an owner, just like in the commercials for cold medicine where they show the parent telling the child they are taking the day off (not possible as a parent!), there are times when playing hooky sounds mighty good.
A couple things could jumpstart my energy on those days. One of them was tasting my caramel. Whether it was doing a normal QC check or tasting a trail flavor or just snagging a drip from the kettle, tasting my product, the one I created and built and saw bring others pleasure, gave me a boost.
The pride generated reminded me of why I did what I did and why I loved it. I may not have walked faster or felt physically less tired, but psychologically, my mental load became a lot lighter when I reminded myself what I built. Being an owner is hard, but it brings so much pride and energy if you take the time to appreciate your own work.
Blog edited by Amanda Telford.