The Kitchen Table Vote

We wanted the LOI signed before Thanksgiving. There was no competing bidder forcing the pace, and the deal was in no danger of going cold. The deadline was the holiday itself. Four days off, no work, and every person the seller trusted most sitting around one table. The deal was going to be discussed at that table whether I liked it or not. My only real choice was what the family would be discussing: a signed document with real numbers and real protections, or a secondhand summary of a phone call.

This was a deal we were deep on last fall. Good business, long operating history, an owner in his 60s who had built it from a shop and a phone. The banker's timeline would have put paper in front of him in early December. We compressed it by two weeks on purpose, and the reasoning behind that compression is the whole point of this piece.

The Second Committee

Every founder deal has two investment committees. The first one looks familiar: a term sheet, a model, counsel on the phone, a list of open items. It meets during business hours and it keeps a record of its decisions.

The second committee has no agenda and no minutes. It is a spouse who spent 30 years watching the business take the weekends. It is an adult daughter who wants to know if dad is finally going to slow down, and a brother-in-law who has opinions about private equity that he read somewhere. It meets at night, usually over food, and it holds the only unappealable veto in the entire process.

The second committee also holds better information than I do in one specific area. They have watched the owner on Sunday nights for decades. They know whether he actually wants to sell or whether he wants to be told that he could. No CIM contains that answer, and no management meeting surfaces it. The kitchen table gets to the truth of it in one evening.

Sellers rarely mention this committee, and buyers almost never ask about it. I have watched it kill more deals than quality of earnings ever will. The signature on a purchase agreement belongs to one person. The decision behind it almost never does.

The Calendar Was the Strategy

Once you accept that the family vote is coming, the only decision left is timing. I wanted it in November.

Here is the math I was doing. If the family processed the deal over Thanksgiving with a signed LOI in hand, I would hear the real answer in the first week of December. The cost of a no at that point was a few weeks of my time and a modest legal bill. If instead we papered the LOI in December and the family did their processing in fragments over the winter, while diligence spend was already running, the same no would arrive in February or March and cost real money. A quality of earnings report is expensive. A quality of earnings report on a deal the seller's family never actually endorsed is the most expensive document in this business.

So we traded polish for the date. We left negotiating points open that counsel would have preferred to close, on the theory that a term you can win in exclusivity is worth less than a holiday you can only use once a year. The LOI was signed the Tuesday before Thanksgiving.

Then I did the part that felt unnatural. I told the seller to take it home. I said the words directly: talk to your family over the holiday, all of it, the number, the rollover, what your Tuesdays look like in two years. Call me in December with whatever they said. Most buyers spend that week hoping the family will not bring it up. I asked for the opposite.

You cannot keep a deal away from the kitchen table. You can only control which version of the deal shows up there.

Paul W. Swaney III

What Came Back

The call came the Monday after the holiday. The family had questions, and I want to record what they were, because none of them appear on any diligence checklist I have ever seen.

Does he actually get to stop working, or does the contingent note keep him chained to the desk. What happens to the longtime employees, the ones who came to the kids' weddings. Does the name stay on the building. Is the number, after tax and after the rollover, actually enough for the life they had planned. And one that stopped me for a moment: who is this buyer when something goes wrong.

There was no question about EBITDA adjustments and nothing about working capital. The second committee underwrites the buyer, and it underwrites the life on the other side of the wire transfer. The business itself barely comes up, because the family already knows the business. It ate their weekends for 30 years.

We answered everything in writing, and I offered to sit down with the family in January, spouses included. Some of those answers landed. The vote still went against us. The seller called back in December and told me, with more honesty than most buyers ever get, that his wife was not ready, which meant he was not ready. The deal ended there. He kept the business. As far as I know he still owns it, and we still talk.

It cost me a few weeks and a legal bill. That is the cheapest no I have ever received.

What This Means for an Independent Sponsor

A funded buyer lives with a clock that runs in one direction. Capital wants deployment, the pipeline report wants progress, and the pressure always points toward getting paper signed and diligence started. Inside that system, a holiday where the whole family gathers looks like a threat, something to outrun before anyone can talk the seller out of it. Earlier in my career I would have run exactly that play, and I would have learned the family's answer in March with a six-figure diligence tab already spent.

I do not have that clock. When it is your own money, your own time, and your own name, an early honest no is the second-best outcome available, behind only a yes the whole family actually stands behind. The deals that hurt are the ones where the no arrives after the QoE invoice, or worse, after close, in the form of a seller who regrets everything and a town that knows it.

So I treat the second committee as a real committee. I ask early who the seller talks to at night. I put paper in their hands before the moments when families naturally gather, not after. And when a seller tells me he wants the holiday to think it over, I have learned to hear that as progress, because it means the deal is finally in front of the people who will decide it. The Thanksgiving LOI was the deliberate version of all of it.

The family always votes. The only question is whether you are on the agenda.

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.