The GM Found Out on a Friday

The GM found out on a Friday afternoon, from an email he was never meant to see. A data request had come down from the sell-side bank to the controller, routine to the people who send such things for a living, and hanging underneath it was the forwarded chain: a project name, a timeline, a buyer's initials, and a line about management meetings to be scheduled once the seller was comfortable. The controller walked it into the GM's office because the controller worked for the GM. That is the whole anatomy of how a secret dies in a company. Nobody betrayed anyone. Somebody hit forward.

I knew none of this on Friday. I found out the following Wednesday, when the seller called me in a voice I did not recognize, and by then the company I had spent months pricing had spent 5 days becoming a different company.

How It Got Out

The seller had sworn to me that nobody knew, and he believed it. Inside his building he was right. He had kept the circle to himself and his bookkeeper, held calls off-site, and locked the folder. What he could not see was the process itself. A live deal generates email the way a plant generates scrap, and every request that moves between a bank and a company is a copy of a copy, with its history hanging underneath like a root ball. Somewhere on the bank's side, a request list that should have gone through the owner went straight to the controller instead, thread attached. Nobody meant harm. Speed did what speed does.

I will own my contribution too. I had walked the plant twice by then, and in those days I toured a floor typing notes into my phone like an insurance adjuster, pausing at machines, photographing rack labels. I believed I was being thorough. The floor believed I was counting something, and a floor is never wrong about being counted. The email sprang the leak, but I had spent 2 visits fertilizing the ground it landed on.

The Monday Conversation

The GM sat with the printout over the weekend. On Monday morning he walked into the owner's office, closed the door, and laid the chain on the desk. He had run the man's operation for 15 years. He asked if it was true.

And the owner, caught cold, made the mistake that actually broke the company. He said it was nothing. Valuation work, exploratory, accountants being accountants. The GM had been told nothing for months, which he understood, because he knew what a sale process is. Then he was told there was nothing, standing in front of the evidence, and that he could not forgive.

What died in that office was invisible on any statement I had. The GM's effort was discretionary, the way it always is with the person who actually runs the place, and discretionary effort stops being given the moment it stops being deserved. By the time the seller called me on Wednesday, the two men were speaking through the bookkeeper.

A GM who hears about a sale from his owner hears a beginning. A GM who reads about it in a forwarded email reads an ending.

Paul W. Swaney III

Why I Walked

I took two weeks before deciding, and I went back once more to be sure. The numbers had moved a little. The company had moved a lot. On that last visit a customer issue surfaced while I was standing in the front office, the kind of small fire the two of them had put out together a hundred times, and I watched it get handled in separate rooms, each man working his half through people instead of walking 30 feet. What I had priced included two men who trusted each other, and that asset was gone from the building. Had I closed, I would have owned the machines, the receivables, and a standoff, and no earnout formula prices a standoff.

There was a second problem, and it was mine to weigh. The seller had told me nobody knew, and believed it. Then he told me it was handled, and believed that too. He was an honest man with an honest man's blind spot: he thought containment was a matter of intention. I called him, told him plainly that he needed to repair his house before he sold it, and left on terms good enough that the door is still open. Walking well costs nothing and is remembered for years. I have written before about deals that came back through exactly that door.

What I Do Differently Now

Every deal I work now starts with a communications plan, one page, agreed with the seller and the bank before diligence spends a dollar. Who inside the company knows, and when the next person gets added. Which two people are allowed to email each other, and through whom every request routes. No real names in subject lines, no forwarding with history attached, and requests batched weekly instead of dripping into the building one alarming email at a time. If a seller finds that excessive, I tell him this story with the names filed off, and he stops finding it excessive. The page costs an hour. The forwarded chain cost a company its general manager's faith and cost me a deal I wanted.

The bigger change is the GM. I now push to bring the number two inside the tent early, before the heavy spending starts, with the owner doing the telling and me in the room with a plan for him. A GM who hears about a sale from his owner, with the buyer sitting across the table talking about his future, hears a beginning. A GM who reads about it in a forwarded email reads an ending, and he starts acting accordingly that same afternoon. The retention conversation belongs at the start of diligence, held with respect, in daylight.

And I fixed my own conduct, because the floor reads the visitor before anyone reads an email. Hands in my pockets now. I walk, I ask, I remember, and I write it all down in the Uber afterward.

Operating alone is what lets me make those promises stick. When the GM comes inside, the plan I put in front of him is mine to offer, that week, with nobody behind me to check with and nobody to blame if I break it. In a small company a secret survives on design, and the design is the buyer's job as much as the seller's.

Bring the man inside before the inbox does it for you.

Paul Swaney is the founder of Swaney Group Capital, a fundless sponsor focused in the lower middle market. LeverUp® is published weekly. More if I have something else to say.