Engaging 2 | Alignment Check

Engaging 2 | Alignment Check

by | 'May 28, 2017' | Engaging | 0 comments

Amanda Owen Cooper

After Dan Sumner called Mike, and our Owners Council met here in my office to discuss what to do, we decided that Mike and I should meet with Dan. I would be there as an owner, not a lawyer, which was interesting—it took some discipline to think like an owner, rather than to focus on the structure and nuances of the negotiation.

Dan is a bit of a maverick and never has an unexpressed thought. He also knows his business and his market. He’s a good salesman but doesn’t give away a lot of details. He clearly wants to expand and diversify, and I can see why Owen Products would be attractive to him.

I reported to the group about the deal Dan is proposing, though there aren’t lots of details yet. Dan is proposing an acquisition for cash and stock. He provided us with his most recent financials, and said he’d open the books if we wanted to pursue the deal. I asked about board positions and Dan said that we would certainly have a role.

We have a fiduciary duty both to ourselves and to this business to evaluate this opportunity carefully. In my experience, no potential acquirer starts with their best offer. I think if we wanted to pursue this opportunity in some way, we could structure a workable deal. I was thinking this morning about how we might negotiate a shareholders’ agreement to protect our interests.

Martha Owen Jones

I just got off an Owen Products, Ltd. Owners Council phone call with my siblings. After Dan Sumner called Mike to see whether we’d be willing to be acquired, we had a big meeting to discuss what we should do. I think for all of us our first instinct was to say “We’re not for sale!” and go back to our lives, but we agreed after discussing it that Dan’s company, Sumner Ceramics, might have quite a bit of alignment with Owen Products, and that we should follow up. I must say, I was pretty impressed by our ability to work through the issue in a thoughtful way, looking at the pros and cons. Everyone actually listened to each other, which we certainly never did when we were kids.

Mike and Amanda just got back from meeting with Dan. Mike says Dan has really thought about the opportunity—why our raw materials are compatible, how our two companies’ plants could coordinate production, how we could generate some synergies on marketing and sales by combining our sales forces. Dan is a good businessman—Dad always respected him—and Mike and Amanda said the same thing.

But, I’m worried. This flurry is exciting, and we do need to talk to the board about it, but I’m worried that we’re getting carried away. Our family has run Owen Products for three generations now. It provides jobs, gives us focus, keeps us connected. We have real expertise and opportunity in our own market. And I think it would really cripple our family if we didn’t have the business. What would we talk about? We wouldn’t have the same opportunity to work together like this. Maybe Amanda and Christopher don’t feel the same way, since they don’t work in the business and are super busy with their own careers. And maybe the fact that my husband, Ryan, has a great career at Owen Products colors my opinion. What would happen to us if Owen Products does this deal?

I’m trying to keep my owner hat on, but this really worries me. I want to talk with Ryan but our Code of Conduct prevents us from talking to spouses about critical issues.

OK, I need to focus. I’m co-chairing the board right now, and we need to present this opportunity to them next week. I recommended that everyone reread our Shared Purpose and Vision and contemplate how this deal would affect them. I’ll email it this afternoon to keep it fresh in our minds.

Christopher Owen

Clearly, my experience growing Combusynth has made me jaded. Mike and Amanda are talking about Dan Sumner’s ideas and all I can think is “blah blah blah”—this is the same stuff I hear from potential joint venture partners or the venture capital guys. “Synergies!” “Here’s how we can be the greatest company in the world if we do this merger!” But you have to ask yourself: if this could be so great, why haven’t you done it already? In my business, an acquirer may want access to the patents and the technical expertise, but here, it’s just process production knowledge. I mean, I get that ceramics manufacturing is an art as much as a science, but it doesn’t require Michelangelo to make a clay pot. Or a piece of roof tile.

What also concerns me is that, looking at the financials he gave us, Dan’s valuations don’t make sense, and he wants to do most of the deal for stock. There is a lot of debt on Sumner Ceramics’ balance sheet, compared to ours. I pointed out to my siblings that owning Dan’s stock wouldn’t really mean anything: Sumner Ceramics is privately held, and there’s no guarantee he’ll pay dividends or even redeem stock if we wanted out or just needed cash. And while he says he’d keep our team in place, don’t count on it. Every deal like this that I’ve seen, the original leadership team is out in two years.

Get the inside-scoop on “Alignment Check” in Episode 2 of The Family Business Podcast.

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