During the days that followed the terrorist attacks of September 11, 2001, most Americans believed they were at war. The crisis paralyzed owners who wondered what would become of the world. Spending stopped. The stock market tanked. At the time, Sunny Vanderbeck owned and operated a web hosting company called Data Return and had just seen a $1 billion acquisition offer from Compaq go up in smoke.
Vanderbeck took stock. Data Return was burning cash, and Vanderbeck figured they had six months to get a deal done before they could face mortal danger. He continued to look for a buyer and soon received another offer from a technology consulting and software business rolling up IT services companies.
Vanderbeck agreed to sell Data Return in return for stock in the IT services roll-up. Soon after the transaction closed, Vanderbeck realized he had made a mistake. As he recounts in his book, Selling Without Selling Out, Vanderbeck recognized that his company’s acquirer was suffering the consequences of a buying spree, during which they had made forty recent acquisitions. Data Return’s acquirer had bitten off more than they could chew, and a little over a year later, they declared bankruptcy.
Vanderbeck had fallen from being just days away from a $1 billion payday to owning shares in a bankrupt business. He still had his original Data Return partners and investors who believed in him, so Vanderbeck assembled his team again and bought the assets of his former company out of bankruptcy for $30 million. Four years later, Vanderbeck sold Data Return to Terremark Worldwide in a transaction valued at $85 million.
Vanderbeck recommends you write down what’s important to you in a transaction (in addition to money) before you sell your business as the first step in a happy exit. In this experience, he said they were glad they had the opportunity to buy his former company out of bankruptcy. It was a do-over for him. When they bought it back it was profitable. They built it over the next 4 years and then had a successful exit.
Is your business producing the household income that you need today and maximizing it’s valuation to set up multiple generations of wealth?
Contact Kirk W. McLaren, CEO, MBA, CPA, IFM, and Georgetown University lecturer at kirk@foresightcfo.com to learn how the eight drivers help you grow with clarity.