From Dan Peña – Executive Coach and Mentor to the High Performer.
Dear Subscriber and Friend,
Well the year has started off with a bang!
My home in California sold; the prospects for deals are better than I anticipated; one of my mentees has ascended to the lofty position of "Top Gun" in a large organisation; and another mentee is closing their first deal.
As I sit on a train from Derby, England to London, Sunday night (after an important client meeting), I have decided notwithstanding the above to write about a line from a movie just released in the US. "I am Sam" is a movie about a mentally disadvantaged father, played by Sean Penn, trying to keep and raise his 7/8 year old daughter. He says in a very poignant moment to his aggressive female lawyer, "You don’t know what it’s like to try, and try and try and you don’t get there".
When I heard this unmistakeable cry for help and understanding I, perhaps for the first time, understood the challenge most people have in exploiting new avenues in the business world I have existed in for more than 30 years.
Ladies and Gentlemen, Boys and Girls, the entire QLA methodology is based indirectly on this idea. The "Dream Team", advisors, et al are there to preclude you from experiencing what Sam did. At the end of the day following QLA helps you in all facets of your life, because it is basically a program that helps you lift your self esteem and self worth by practise and surrounding yourself with high performance people.
Virtually all my adult life, or at least since I was about 21, I have sought the people who could assist me in getting the job done. I have come to realize, time and time again, that modelling success is the method that eliminates much of the pain associated with failure or the fear of failure. Of course personalities differ greatly, but finding and ultimately choosing someone to guide you is of paramount importance. In the movie Sam found a strong female lawyer. As I said in my recent newsletter the economic environment is wrought with opportunity. I thought it germane to describe/define, using current vernacular and descriptions, what and how deal/transactions are described. The following is what The Guthrie Group(TGG) is involved with. In addition to our transactional practice we have a strong consulting practice as our website (www.theguthriegroup.com) illustrates.
MBO – The term "Management Buy-Out" (MBO) has come into common parlance as a generic expression representing the acquisition of a company from it’s owners by the existing management team. Such an opportunity is most likely to arise out of a proposed sale or retirement situation in a private company, the sale of a non-core subsidiary by a public quoted company or as a result of an insolvency. The necessary finance will normally come from a blend of the management team, banks and institutional investors together with, in appropriate circumstances, the current owner.
LBO – Increasing, "buy-outs" are being used in public companies and other larger situations often as a defensive move, such as restructuring the activities of a group or even returning it to private ownership. This has spawned the term "Leveraged Buy-Out" (LBO) as a variation on the MBO theme, whereby a large part of the funding to make the acquisition is debt financed – primarily by institutions providing what is known as "MEZZANINE DEBT". Mezzanine debt sits between equity capital and secured debt when the cash flows of a business can support a higher level of borrowing than the asset base alone can secure.
EBO – A further MBO variation is the "Employee Buy-Out" (EBO) whereby managers are joined in full equity participation by a sizeable number of the employees of the business.
SSO – Another variation is the "Sponsored Spin-Out" (SSO) where a large company may recognise that the development of a project may be better suited to a more entrepreneurial environment, but does not wish to forego all of the upside if it is successful. In such a situation the business could be "spun out" into a new company, owned jointly by the original company, the management team, and an independent institutional backer – often with an option for the original company to buy it back on a price formula. It is, therefore, in the best interest of all parties for the management team to make a success of the venture as an independent business; at the same time, the presence of the institutional investor should give it the credibility to withstand any undue influence.
BOMB – Yet another phenomenon is "Bring the Old Management Back" (BOMB), where an entrepreneurial business has been sold to a large professionally managed organisation under whose direction it has lost it’s way – and profitability. Provided the vendors are not in breach of warranty, and cannot be held to be so, there could be an opportunity for them to buy-back the business on favourable terms.
MWO – Where a MBO is unsuccessful or impractical, and taking into account the potential legal ramifications of so doing, a management team may consider a "Management Walk-Out" (MWO) as an alternative. This is, in fact, a form of start-up – perhaps a "running start-up" – but the complications and possible legal implications should not be underestimated.
MBI – Where an external management team targets a business as a "Management Buy-In" (MBI) it is usually because it believes it can do a better job than the existing management. The opportunity may therefore be for a stagnant business, a turnaround situation or even an outright rescue – an can apply to both private and public companies. All of the funding and leveraging techniques (financial and psychological) that are used in MBO’s are equally applicable to MBIs.
BIMBO – About half of all acquisitions by management teams result in the involvement of a combination of existing and outside managers, either by design or at the insistence of financial backers if a strengthening of the team is a condition of their investment. Such a transaction is called a "Buy-In/Management Buy-Out" (BIMBO).
IBO – With the increasing size of deals, and the weight of capital needed, larger MBOs and MBIs are becoming known as "Institutional Buy-Outs (IBOs) since the actual management teams are initially only able to afford a relatively small stake in the overall company. However, it can still turn out to be a substantially more lucrative deal for the management team than going with the trade sale.
There is money available, almost on any front, for a strong management team with an economic model that works. Start-up capital is hardest to come by. This finance is most easily obtained from F – F – F, or friends, family and fools!
I’ve enclosed two recent emails from QLA devotees as post scripts. They are written from different directions, but both are important. One is a Quantum Leap In Progress (QLIP) and the other is a very successful entrepreneur.
Until my next newsletter I wish you good health and fortune, and may the QLA force be with you.
To Your Quantum Leap
It’s about 4.30am Sunday morning.
Having gone through your Finance Your Dream video, I am having a hard time sleeping!!!
I have just got up to re-set my goals. I have been aiming way too low.
I always tell people that the one thing that "screws" with the mind, is "lack of direction", advice that I personally ignored over the past year or so!
Thank you Dan for delivering the "Kick Up The Ass" that I needed.
I will keep you updated with my progress.
I have been passing the web address to some people that I know will enjoy your style.
Hopefully they will benefit as much as I am.
All the best.
MB (QLIP – Quantum Leap In Progress)"
Hi! – I would like to wish you a great holiday and thank you for being part of an interesting and challenging year. I’m sure you and I have both done our best this year with varying results on varying fronts…That’s Life! Let’s go home, enjoy our friends and families and reflect on how we can be……………
Better Team Members
Better Supporters of our Teams
Better Husbands and Wives, Lovers and Inspirers
Better at Making a Difference
Better at Being More Human
Better at Balancing our Fears and Desires
Better at Being a source of positive change in every situation
Better at Smiling and Encouraging
Better at Looking for Good.
I promise I’ll do my best too! That’s all any of us can do, so have a great Christmas.
(As Dan Peña and QLA would say the only caveat to the above is to add, as Churchill said, "Do what’s necessary – not merely your best!")