When your head says you’re making a great business deal, make sure your stomach agrees

There is a critical and often overlooked aspect of selling an LBM business that can cause just as many problems as a failure to come to agreement about price and terms. It is not an item on any attorney’s or investment banker’s checklist and it is seldom discussed openly in meetings surrounding a pending deal. That critical element is the emotional aspect of making the decision to sell a company that may have been founded by the current owner or held in a family for generations. We once heard the story of a selling business owner from another industry, during the era when closing a transaction meant signing an endless stream of physical documents in a lawyer’s office. In the midst of signing, the seller excused himself briefly and disappeared with no communication with anyone, including his wife – for two days. After having made his peace with the notion of selling the company, he apologized to all parties and reappeared at the lawyer’s office, consummating the transaction. Needless to say, it is far better to address the emotional aspect of a sale well in advance of such a personal crisis. The emotional issues surrounding the sale of a company are fairly obvious. If the current owner founded the business, they have likely poured their heart and soul into it for many years. Aside from family, their business is usually the most precious thing in their life. If the business was founded by prior generations, that question can weigh even more heavily. Most selling owners take comfort in the fact that they, and the members of prior generations of owners, want whatever is best for the company. Often, that means joining forces with a larger organization. The only way to assure oneself that the chosen buyer is the best one to continue the legacy of an LBM business is to do the proper reverse due diligence on the buyer. That is why, as the date of closing a transaction nears, buyers and sellers begin to interact directly more often, without the presence of intermediaries. The dinners and the phone calls often last hours at that point, as buyer and seller get to know one another better. Beyond that, selling owners should talk to others that have sold a company to the buyer in the past. These types of references, some of whom will preferably no longer have any economic connection to the buyer, can serve as an excellent indicator of how it will be to work with the buyer after closing. It is particularly important to ensure that the level of control over the business that the seller is willing to give up matches with the buyer’s expectations. It is also critical that the selling owner have a plan for how their life will look after the deal. The second wave of astronauts to walk on the moon learned from the struggles and depression suffered by the earlier astronauts, who had failed to make a plan for what happened after the moon. It is the same for business owners. Many utilize their newly created liquid wealth to enter other business ventures. Because of the nature of the building industry, many selling owners pursue their interest in real estate as developers. Others use a portion of their proceeds to found small private equity funds. This keeps them engaged in growing businesses, without the risk of having all of their capital at risk. If a selling owner includes in the press release announcing the sale of their business a reference to the fact that they are seeking to acquire building products companies, they will see a steady stream of deals from other sellers. Other selling owners seek seats on the board of directors of public and private companies. These roles can be a great way to continue to utilize hard won skills without a full-time commitment, as can be a volunteer position with nonprofit groups like the Service Corp of Retired Executives (SCORE, www.score.org). These groups bring top notch talent at no cost to budding entrepreneurs that are growing their business. Most retired business owners find these and other philanthropic or charitable activities to be among the most rewarding work they have performed in their career. Along with doing what is best for their company, selling LBM owners have an obligation to themselves to use their chosen fork in the road to write an amazing new chapter in their own story.