I met with a CEO last week at RSA. He sat down with senior private equity professionals from 5 firms in a single day. All of them are interested in his company. At the beginning of the day he thought he would take the meetings, pick a partner, and ask for an LOI. Now he realizes that he has made a tactical error. He is in direct conversations with 5 potential bidders, but he has not set it up as a competitive process and he is negotiating with his future bosses.
“I need an intermediary to turn this into a process,” he said. “I don’t want to piss them off. I don’t know what all the terms are that we have to get in place. I don’t have a position on valuation except for an arbitrary number that my partners and I picked out of hat. I don’t know what to ask them for in order to keep things moving. I don’t know how to restart the process if it stalls. I’m a smart guy and I can figure all that out, but the price will be lower, the structure will be worse, and the whole thing might come apart.”
I am looking forward to having him on a panel. He gets it. He will arm himself properly before going into battle again.