When David Levine was negotiating the sale of Mr Beams to Ring, there weren’t many people he could confide in about the ongoing talks.
“It ate at me for months that I couldn’t tell people about it,” Levine says. “My operations guy was put in charge of a project to get some swag with the Mr Beams name on it. He came to me and said, ‘I’ve got this great idea — backpacks.’ What he didn’t know was Ring had sent me 26 backpacks and they were sitting in my garage to give out to everybody as soon as the deal was announced.”
Ring bought Mr Beams to integrate its innovative LED lighting technology into a new line of home security products. Levine — who has launched 21 consumer products in his career and is now president of Ring Beams — says it took plenty of work to make it happen. But the deal felt like a perfect match. And two months later, Ring was bought by Amazon for $1 billion.
Levine declined to comment on the Amazon deal. However, he did speak with Smart Business Dealmakers about the complexity of selling a business and the approach he took to make it a more manageable process.
How do you know when it’s the right opportunity to sell your business?
You have to look at your business and ask yourself, ‘Is there an outside resource that if I could have access to that resource, this business could become so much more than what it would be without it?’ Can my co-founder, Michael Recker, and I continue to run the company and complete the vision that we had, just at a grander scale? We looked at Ring and the resources for product development, marketing and awareness. From both of our standpoints, it felt like tremendous synergy could be achieved by combining the two companies. From there, it was just a matter of finding the right structure to achieve it.
How do you establish a good rapport with a prospective buyer?
We’re a bootstrapped company that raised very small amounts of capital, hired local talent and overachieved. We’re not one of these Silicon Valley tech companies. Ring is fast-moving, aggressive and they’ve raised quite a bit of very smart money. The fear was we would just be run over by their aggressive nature. That was the biggest part of the negotiation. It comes back to trust.
It was Jamie Siminoff, the founder of Ring, and I who were doing the negotiating. When the times got tough, one of us would say, ‘Hey, we’re going to be working with each other in a few months, hopefully. Let’s just remember that.’ It was this idea that we were in it for the long run. We had to negotiate in such a way that we maintained our respect for each other and our excitement to be partners. It’s helped us now as we’re working together by going through that stage of getting to know each other and understanding each other’s styles.
How can a CEO make a business attractive to potential buyers?
The No. 1 thing is to be financially healthy. The worst situations I’ve seen are when companies count on a deal happening and they leave their financials and their cash situation in a tricky area. All of a sudden, the deal doesn’t come through and you’re in really bad shape. You need to have a healthy balance sheet and a vision for how you can grow the business. You may not be able to do it yourself. It may be that you need bigger resources. You have to bring that game plan to another company and get them excited about it.
Mike and I had this vision, always thinking ahead, always patenting. What is going to happen when LEDs get more efficient? That vision was so much more valuable than we ever expected it to be. You think of a vision as a soft asset, but it’s not. It’s a significantly attractive part of why another company would want to acquire you.
What role do external partnerships play in making a deal?
If you’re looking to go out and sell a business, try to form working partnerships with as many of your potential strategic buyers as you can find. At first, we looked for other lighting companies. We had battery backup technology that they could put in their light fixtures and that was interesting. Once we saw ourselves as an internet of things company and started reaching out to leaders in that sector, it got really exciting. We were a unique piece that could compete there. We were now in a much hotter space than lighting, where there was consolidation.
What advice do you have for other business owners?
The process of doing a deal is a whole different world. There is a whole industry of people who have nothing to do with the operations of a business, but who are constantly working on deals. They exist in law firms, investment banks and other areas. Having one of these individuals as a trusted adviser through the process is important. Interview a lot of people and give yourself time to find the right partner. That person is going to be your psychologist, your parent, your financial adviser — it’s a really important role. Their ability to keep things in perspective and their dealmaking instincts are really important to get a deal done.
How to reach: Mr Beams, www.mrbeams.com