Jenny Ch. 05

Moreover, Vinnie resented the constant monitoring of his performance, and the obvious success of Robbie Delgado. He wasn't enjoying his work, and looked for any reason to be off the jobsite. He hated overtime as much as Tony and Tom, but for a different reason. It cut into his playtime.

Tony Blanton had built the business slowly and carefully, and knew that the reputation they had earned was responsible for much of their success. He had often preached to both his sons that the only real equity they had in the business was their reputations.

Tom had understood this truth from the beginning, while Vinnie thought it was just words. After all, the business was going better than ever before. There was enough work for well into next year, and future customers were waiting for a slot.

Tom was unwilling to simply let things go on as they had been. It was too much work to try and keep up both his end and Vinnie's as well. Now, with his father off the job, there would be even more pressure on him. He couldn't let the status quo become their operating mode.

Shortly after Tom and Jenny had announced their engagement, Tom had a meeting with Steve Inhalt, his personal business consultant and financial advisor, and Frank McCauley, a well known business lawyer in Vancouver. The purpose of the meeting was to explore a potentially explosive option in the Blanton family. Tom would buy Vinnie's share.

It was not technically difficult, but politically tricky, and more importantly, brought all the family forces into play. Tom knew that Vinnie would opt to sell the business if he could get the support of at least one other family member. A fifty-fifty vote would force the issue and most like cause the dissolution of the business.

To head this possibility off, Tom thought the best option, failing to convince Vinnie to participate more effectively in the business, was to buy him out. The real question would be the worth of a share? For that answer, Tom needed the help of Steve and Frank.

During the time that Tom and Jenny were in Europe, Steve had researched the business value. Frank had been authorized by Tom to discuss the worth of the business with potential, previously identified buyers. Steve made discreet inquiries, and background discussions helped him start to set a likely price. All of this had been done without the knowledge of any of the other three family members.

The problem as Steve saw it was to convince Vinnie that the valuation was valid. He was concerned that the youngest Blanton son might have an unrealistic idea of the worth of the business.

Tom knew this could be destructive to the family if it wasn't done properly. He needed some leverage on Vinnie to help persuade him to be reasonable throughout this process.

On the Friday after they had returned from Europe, Tom called Steve Inhalt and suggested a progress meeting with Frank. Steve agreed to set up the meeting for an evening early the following week. He called Tom back later that day to confirm seven pm, Tuesday, at Steve's home.

At seven fifteen on the following Tuesday evening, Steve poured a glass of red wine for both Tom and Frank, and the meeting was under way. Frank made some basic suggestions on methodology of any sale/purchase agreement, and had a couple of useful suggestions on how to validate the value estimates of the shares.

He also put forward the idea that Vinnie might come forward with an offer for the business from an as yet unknown party. If that were to happen, any offer must be validated and the potential buyer vetted before the offer would be accepted as a legitimate price valuation. Frank agreed to draw up these "rules" in a formal version which would be presented to any prospective buyer, as well as Vinnie.

Steve then took over the next portion of the meeting to discuss what he and Frank had learned about the potential sale price of the business.

"We have two very different scenarios, Tom," Steve began.

"First, the sale of the business that includes most, if not all of the current management and employees. It's pretty clear that anyone who wants to buy this business wants the people that made it a success. They recognize that your Father and Mother wouldn't be part of the sale, but you in particular, Tom, are considered the principal asset of this business as a going concern," he said bluntly.

"What about Vinnie?" Tom asked.

"Strangely, his name was almost never mentioned," Steve said. "In fact, some of the people I talked to didn't know there was another brother. Unfortunately, those who did know him, or of him, had also heard of his ... playboy reputation."

"What's the second option?"

"Second is the sale of the business without the management group. I assumed that the regular employees would probably stay, or at least most of them," Steve continued.

"This price would be considerably less than the first option. In fact, it would almost halve the value," he said matter-of-factly.

"On top of that, there would be a non-compete clause insisted upon to keep you from re-entering the business for five years. Not a very favorable option in my view," he concluded.

"So Steve, what kind of number does option one present," Frank asked.

"Well, I have to say that there are some wrinkles about how the money would be paid. You know, the usual shares versus cash, and over what period of time the sale price would be paid out. However, all things considered, most of the buyers seem to think your little family business is worth something north of two million," Steve said.

"Holy shit! I had no idea," Tom exclaimed. "We've just got a couple of back hoes, trailers, saws, and some power tools," he said in confusion. "Where did that number come from?"

"Well, its best described as 'Good Will.'" Steve said.

"It's the value the individuals in the business put into it to make it a success. Your father and mother and their two sons have built a wonderful reputation over the years, and that is the momentum for all the future business.

"The value to a buyer is what all of you do to make the business profitable, and to give it the potential for growth. Almost every buyer confirmed that by claiming they would never change the name of the business. It's like a trademark," Steve concluded.

Tom sat silently for a while, lost in thought. Finally, he looked at Frank and Steve and said, "Well, it looks like it would cost me at least a half million to buy Vinnie out. Is that a workable option for me without getting too far in debt, Steve?"

"Yes, I think so. It will take a bit of creative financing, but I think it's doable," he stated confidently.

"OK," Tom sighed. "Thanks guys. I really appreciate all your efforts. I guess the rest is up to me now. I'll have to approach Vinnie and see what happens next." He looked gloomy at the prospect.

"Be careful, Tom," Frank said. "Just give Vinnie the basics to begin with. You're willing to look at buying him out. You'd get professional estimates of value and share them with him. Don't discuss the people in versus people out option. Make him do a bit of work on his own. See if you can get him to give you an idea of what he thinks the business is worth."

"Yeah, thanks for the advice," Tom said. "I'm not looking forward to it, and I'm really conflicted about when and what I tell Dad and Mom."

"That I can't help you with," Frank smiled. "I don't envy you. Family businesses are very difficult and personal entities. Your situation is more common than you think. Good luck," he said, shaking Tom's hand.

Frank declined another glass of wine, and left after saying goodbye.

Steve's wife Ingrid wandered into the room, sensing that the meeting was over. She had a proprietary interest in Tom through his new wife, Jenny.

"Does Jenny know about this, Tom?" she asked.

"Yes, in general ... I've told her what I've been thinking," Tom said quietly. "She grasps the significance of it, and the dangers as well."

"When do you think you'll talk to Vinnie?" Steve asked.

"Maybe tomorrow, if I can get him alone and sit down with him."

"Good luck." was Steve's only comment.