Career Stage 4: Selling Our Family Business to Tom Auth

Career Stage 4: Selling Our Family Business to Tom Auth

The first 3 posts in this series discussed some of the lessons learned when I started working at the Vomela Company when my father was plant manager, served as Vomela CEO after my father bought the company, and then attempted to buy Vomela from my father.

As I explained in part 2 and part 3 of this series, Vomela had undergone a total restructure to reinvent itself for future success. My father had all but stepped aside, leaving me to run the business. Our gross margins and profits were off the charts.

But just as I was about to enter the buying process seeking sole ownership of Vomela, my wife shocked me by filing for divorce. To avoid legal complications, my father refused to sell the business to me until the divorce settlement was finalized. He demoted me from CEO to Director of Sales and Marketing. That settlement was advantageous to my ex-wife and cost me dearly.

In my situation at the time, in order to purchase the company, I needed a business partner. That’s when I was introduced to Tom Auth. Tom was a financial expert with experience in buying successful companies.

After careful consideration, my father decided to move forward with the deal, selling Vomela to Tom and myself in a 60/40 split. But I didn’t have enough cash to buy my 40% share in the business. Fortunately, I was able to bank on Tom Auth’s reputation; when bankers learned that he was going to be the majority shareholder, I was quickly approved for the loans that I needed. The deal to buy Vomela from my father closed in 1990.

Not Quite the Future I Envisioned.

With my 40% stake, I went from dreams of independent ownership to the reality of being a minority shareholder. This meant Tom had the freedom to make major changes in how the business was run, such as bringing in an executive from Deloitte & Touche accounting firm to serve as president. Right away, the new leadership started eliminating some of the simple employee perks that had enabled us to retain key employees for decades. Vomela was evolving from a family-like workplace to a more corporate-like culture. Still, Vomela continued to flourish for the next three years. While Tom controlled our finances, I ran sales and marketing. Sales and margins were at all-time highs, and our investments were booming.

Because our combined efforts were producing results, I still felt like an integral part of the Vomela leadership team. Tom shattered that illusion in 1993 when he asked me to sell him the rest of the company. I was stunned. I wasn’t interested in selling the company to Tom (or anybody else). I had worked at Vomela for 17 years, for crying out loud!

Ultimately, I realized I couldn’t compete with Tom financially. So, I accepted that my best option would be to sell my shares to Tom. But I also recognized that I didn’t have to accept his initial book-value offer.

My Strategies as a Seller

I was no longer a rookie in the selling process; I knew that being strategic would be key to receiving the best deal. Here are the steps I took:

I hired independent experts. As partners, Tom and I had previously shared the same consultants – lawyers, accountants and the like. Now, I needed to hire my own. I knew Tom was surrounded by top-notch advisers, so I needed matching intellect. I immediately contacted accountants, bankers and lawyers, who helped me draft a contract. Their guidance was invaluable.

Most owners in my position don’t spend their money on top advisers because they don’t understand the return on investment. However, if you want to avoid being outmaneuvered, mediocrity isn’t going to cut it.

I sought emotional guidance. The thought of leaving Vomela was uncharted territory for me, and I was scared. Vomela was all I’d ever known. The personal coach I hired gave me some much-needed direction through the selling process and the post-close transition period.

I sought out a professional valuation. This proved to be my most valuable decision, because it paid off in two ways. First, it told me what the company was worth. Second, it presented benchmarks indicating where Vomela needed improvement. Drawing on the appraisal’s findings and my freshly hired experts, I grew the business considerably over the next 19 months.

Then, when I returned to the negotiation table with Tom, I was adequately prepared to negotiate. The payoff? I ended up quintupling (yep, that’s five times) his original offer.

I planned for my post-close business life. As important as it was to close a profitable deal, I knew that securing my success after Vomela was just as prudent. I was only 39 years old at the time and nowhere near ready to retire. I needed to think about what I would do next. Over the course of the 19-month sales process, I dedicated half of my time to the deal at hand, and the other half to planning my future endeavors.

Lessons Learned

Money isn’t everything. Yes, it’s cliche, but it’s cliche because it’s true. Yes, I had achieved my dream of becoming a multi-millionaire before I was 40. But the achievement was hollow; I had no one to celebrate with. My marriage was over, and my kids wouldn’t be there when I got home. My father didn’t want to talk to me, and some of my family members resented me. My company and families were gone, and I wouldn’t be working alongside my Vomela co-workers anymore. Success is important, but not at the expense of relationships.

Trust and transparency matter. Life is too short to hold grudges, and in hindsight I realize that Tom was just thinking like a businessperson. But I wish he had been more transparent about his intentions instead of catching me off guard.

Learn from your mistakes. In the end, I decided to stick to what I knew best by becoming a consultant in the print and converting industry. In fact, I started working as the founder/CEO of the LaManna Alliance the day after Tom and I closed our deal. Since then, the experience paid off big.

In the final 3 posts in this series, I will talk more about some of the lessons I have learned since leaving Vomela, and tactics that made my post-Vomela transition easier.

About the Book

My memoir, They Named You Right, is a personal story about my father, the label-converting business he built and acquired, and some of the hard lessons I learned when he sold the business to me instead of one of my 10 siblings. It’s a cautionary tale about what happens when family wants and interests clash with what’s best for the business and details the consequences of prioritizing business over people.

Get your copy at theynamedyouright.com. All proceeds from book sales will be donated to charitable organizations close to my heart, including Clinics Can Help in West Palm Beach, FL and South St. Paul Educational Foundation.