Ken Marblestone has been a part of successful deals and transactions that fell apart. The latter can certainly be frustrating, but Marblestone says sometimes, it’s for the best.
“There are some deals that are not meant to close,” says the managing director at Cascade Partners. “So the first thing I would do is sit down with the business owner and try to figure it out. Did this deal not close for a reason we’re comfortable with? Or did it not close because of something we should have done differently or something we should have approached differently?”
Marblestone has more than 25 years of experience in capital markets and advising middle market businesses. In one of his prior jobs, he served as president and part owner of iCap Realty Advisors and helped loan production grow from $100 million to $300 million in just over a two-year period. He has a wide range of experience at banks and financial institutions and is a member of the finance committee for the Greater Cleveland Partnership.
In this week’s Dealmakers Live, Marblestone explains why he’s always concerned about something and why there are times when you should not take the advice of your financial adviser. What follows is a transcript of the above video, edited for readability.
Prices are high
Everything concerns me. You’re talking about dealmaking and what might concern me, I get concerned about a lot of things. That’s kind of my job to always be concerned about what’s on the horizon and looking forward. Prices have gotten high in the marketplace. When prices get high and buyers of companies need to achieve a certain return in order to meet their objectives, when they have to meet their return and pay more for these companies, there are certain implications to that. Thinking through what those implications are and how it affects our clients is really important. That’s something I think about often.
Know what you want
There is a company that I know in town here that interviewed six different investment banks. Every investment bank they interviewed said, ‘Well, the right answer here is you should sell that business. Sell the company.’ When I walked in there, the first thing I said to the person was, ‘Why do you want to sell the business? I don’t understand. You want to buy out a partner? I understand, but there are other ways to do that besides selling the business. So help me understand why you want to sell.’
It turns out he didn’t really want to sell. He saw a great future potential for the business. He wanted to buy out his partners who really were not involved in operating the company. There are ways to do something like that. But the adviser needs to take the time and have the interest to ask those questions to get to the right result.
Learn to listen
I spent a lot of my time in deal processes doing a lot of listening. There are times to talk and times to negotiate and there are times to really understand what it is that is being said to you and try to get behind what the issue is that the other person is trying to get you to understand. So I like to sit back a lot and really listen closely and try to understand what’s behind what the other person is saying. I’m not sure who really taught me that. But it’s been a very valuable lesson for me.
Time to move on
It’s OK that some deals don’t close. I maybe have a different perspective. But there are some deals that are not meant to close. So the first thing I would do is sit down with the business owner and try to figure it out. Did this deal not close for a reason we’re comfortable with? Or did it not close because of something we should have done differently or something we should have approached differently?
What you often find is, yes, the deal is dead. That means we’re going to go at it again and find another company to buy or another buyer for our company, depending on the situation. That’s OK. Often you get caught up in the momentum of a deal. That’s really good because it drives you toward closing. But there are times when a deal shouldn’t close. Sometimes it’s a disappointing occurrence. The best way I bounce back and what I encourage our clients to do is you just move on to the next one. There is always another company out there for us to buy. And there’s always another company or private equity firm or family office strategic that might want to buy our company. So we just go on to the next one.