Whether he is working on a deal for himself or shepherding a client through a transaction as a consultant, R. Louis Schneeberger says the emotions are the same.
“If you’re a first-time buyer and you’re risking mortgaging your home and you’re signing personally, which means you go bankrupt if it doesn’t go well, it’s a pretty big deal,” says Schneeberger, executive chairman at Proformex and lead adviser to more than acquisitions. “I take it very personal.”
Schneeberger has experience in all types of business transactions and is always looking for an opportunity to lend his expertise.
We spoke with Schneeberger back in March for a Master Dealmakers. In this week's Dealmakers Live, Schneeberger talks about his approach to beginning a deal negotiation and key items that experienced dealmakers know to check off their list when making a transaction. What follows is a transcript of the above video, edited for readability.
Get your details in order
The beginning of a negotiation is first understanding who the sellers are. Is it a private equity firm that has owned it and it’s the third firm that has owned it? Is it a founder who has had it forever? Is it a family who has had it for a long time? It’s good to understand that so you get a sense that there is more to it than just dollars and cents. The negotiation has to begin with that knowledge. Who owns what, as well as excellent due diligence.
If you thoroughly understand what the company’s results are and other issues that you’ve uncovered during due diligence, you’ll have a much better perspective on how to begin a negotiation. Also, it’s key to not be personal. No personal attacks. A lot of times at the very beginning of a deal, when I’m on the other side, when I’m the seller, it seems like a lot of acquirers start with the attack right away, try to get the seller on the defense, which doesn’t go well and never has.
Dealmaking is a serious game
Most of my work over my whole career has been as an adviser. As a member of Olympic Steel and one of the owners, I was buying for myself. But I didn’t see a single bit of difference from me. As an adviser or as a buyer, it’s personal. It’s extremely personal. I feel as excited or as down as the buyer when I’m working with somebody. It has a big impact, especially when you’re talking about something that major.
If you’re a first-time buyer and you’re risking mortgaging your home and you’re signing personally, which means you go bankrupt if it doesn’t go well? It’s a pretty big deal. I take it very personal as well. Unlike your normal day-to-day stuff, being very well-prepared whether you’re buying for yourself or you’re buying for somebody else is critically important. And I get paid a lot to do it. It’s not like I’m getting some small stipend to help somebody do this. It’s relatively material even to me.
Something that is not common sense
The best thing by a mile is I’ve done this over 100 times. I tend to work with people who have never sold a company once or have never bought a company once. Never at all. So especially for someone who sells for the first and only time, helping them through the whole process, it’s like a deer in a headlight for many people because they don’t understand the simple process to go through.
Anyone who has done it 20 times knows all the steps and knows what to look out for. It’s very gratifying to help someone experience something that is not common sense. The steps you go through, like making sure you have an M&A lawyer versus your normal lawyer who may be an estate lawyer. Is your house clean? You have to make sure you’re ready to be acquired. Are your financial statements in great shape? What other issues do you have? Do you have environmental issues? Have you addressed them and cleaned them up? Do you have any other HR issues and have they been addressed?
Are we going to hire investment bankers? Or are we going to do more of a business broker? Or are we not going to do it at all? Are we just going to talk to the four likely buyers? There are all these processes to go through. I find it very rewarding that they are doing that. When I’m working with an experienced seller, I add value, but not to the same degree as when I work with someone who is selling something for the first time. That’s the best to me.
The Cleveland deal scene, I don’t believe there are as many companies selling as in some other communities. However, the lawyers, accountants and the investment banking environment here in Northeast Ohio relative to size, is bigger than most. You have a lot of competency whether it’s an investment banking firm or the law firms that have a lot of M&A experience. The firms here in town reach a long way from Northeast Ohio. They are basically Midwest firms or national firms, as in the case of a Jones Day or a Benesch, Friedlander or the other ones. They go all over the country. You have a lot of competency for as small a city as we are.
What I’d like to see is more successful companies. There are a lot more of them that are growing and may need that next piece of capital, maybe not to sell, but an equity investor coming in to buy a piece of the company to keep it going so we can continue to build Northeast Ohio. It’s critical to me from my efforts at JumpStart, I want to see Cleveland get bigger and stronger every day versus where we were and where we have been. Clearly we’re improving, but I’d like to see us get further along.