The Consulting Growth Podcast
Joe O'Mahoney is Professor of Consulting at Cardiff University and a growth & exit advisor to boutique consultancies. Joe researches, teaches, publishes and consults about the consulting industry.
In the CONSULTING GROWTH PODCAST he interviews founders that have successfully grown or sold their firms, acquirers who have bought firms, and a host of growth experts to help you avoid the mistakes, and learn the insights of others who have been there and done that.
Find out more at www.joeomahoney.com
The Consulting Growth Podcast
Exit Strategies for Consultants | Episode 3 - Bill Bierce & Prof. Joe O'Mahoney
What happens when business partners who once shared a vision find themselves at odds over an exit strategy? The consequences can be financially devastating and emotionally draining—yet most consultancy owners postpone these crucial conversations until it's too late.
Bill Bierce, managing attorney and co-founder of Beers Kenerson Attorneys, brings decades of experience resolving business partnership disputes to this eye-opening conversation about preparing for successful exits. Having witnessed countless "corporate divorces," Bill shares practical wisdom on how consultancy owners can protect themselves and their equity value through proper planning.
At the heart of Bill's approach is a simple yet profound concept: start with the end in mind. From establishing veto rights and force majeure provisions to creating governance structures that survive personality conflicts, he outlines the essential legal frameworks that prevent catastrophic disputes. These aren't just legal technicalities—they're the foundation of healthy business relationships that preserve value for everyone involved.
The discussion delves into the psychology of partnership, comparing business relationships to marriages that require shared values and clear expectations. Bill reveals how minority shareholders can protect themselves, how to maximize valuation during sale preparation, and why knowledge management systems dramatically increase a firm's attractiveness to buyers. His insights on Delaware corporate law, earnout structures, and due diligence processes provide a masterclass in exit planning.
Whether you're just starting a consultancy or have been operating for years, this conversation offers invaluable guidance on structuring your business for maximum equity value. Take the first step toward a smarter exit strategy by learning from someone who's seen what happens when partners fail to plan—and how dramatically different the outcomes can be when they do.
Prof. Joe O'Mahoney helps boutique consultancies scale and exit. Joe's research, writing, speaking and insights can be found at www.joeomahoney.com
Welcome to the.
Speaker 1:Consulting Growth Podcast. I'm Professor Gero Armani, ceo of Equity Sherpa. We help owners of consultancies quadruple the equity value of their firms over a two to four year period. If you'd like to know how we do this, visit equitysherpacom. Welcome everyone. Today we have the honour and privilege to be joined by William, or Bill, beers, who is the managing attorney and co-founder of Beers Kenerson Attorneys, and it's a real pleasure because, but for many reasons. First, I realize many of you are consultants and are interested in growth and exit, and certainly when you get to the exit. There are many things that I have learned talking to Bill, but also reading his fantastic book, if you haven't found it yet. It educated me and I've been involved in this for a long time. So welcome Bill.
Speaker 2:Thank you, gerald, great to be with you.
Speaker 1:If you don't mind to start with the book. So in writing my book I realised my limits and you probably can't see the number of folded down pages on this, but it's a really well-written, accessible book for a layperson like myself to understand some of the complexities that businesses can face when they're preparing for exit or equity events or really just dealing with partners. So I was hoping you could give me a bit of background about the story that prompted you to write it.
Speaker 2:Well, I never really wanted to spend time to write a book. Okay, I had so many situations with clients where I was resolving the same kind of issues with people who hadn't planned on an exit and they didn't know what they were doing and suddenly the exit was upon them and suddenly it was a catastrophe and a crisis. And I'm saying to myself this could have been planned, this could have been resolved. And so it was a question of studying behaviors and learning from the behaviors of people who have been trying to resolve issues, either amicably or with hostile intent, because they think they're going to get a better deal, or because they're going to. They're special and they could get a special. They're special and they can get a special arrangement. And I saw all sorts of guys who were working together for the common good but then discovering that things weren't right, that there was a disharmony, that there was expectations of exits in the future.
Speaker 2:One wants to do the timing disparity One wants it now, one wants it later. Or there's a valuation issue. There's even events of trying to get shares that you didn't have originally and you make a claim so that you can negotiate and quote, settle the dispute and get shares, claims so that you can negotiate and quote, settle the dispute, and then you beat the taxes tax routine for distribution of a receipt of ordinary income. You try to convert it to capital gains. I've done all sorts of disputes so when I started writing this I said okay. I started thinking about what my issues were and they, they. I was looking at the things from the beginning and from the end and in the middle, and my practice in law is basically international, corporate, commercial, technology and employment. I help businesses globalize and localize, and so I have to think about ownership and strategies for there. So my problem was how do we get people to exit jointly where they all maximize profit? And that's the purpose of the book and to let people start thinking about this as part of their courtship with partners.
Speaker 1:Yeah, and I think that's a really nice way of putting it, especially the courtship bit, because in my experience and I've done it personally, I'm guilty it's very easy early on to say let's leave all the legal stuff till later. You know we've got enough on our plate and you very clearly show in the book the dangers of of just assuming a mutual understanding. And I've seen it sort of and you will have seen it more than I have at the other end where people have assumed things of each other and those expectations are miss, are mismatched, because they haven't been clear early on.
Speaker 2:And I think people don't want to get into the legal part, but actually there's a huge amount of learning about partnering and one of my biggest issues in life is governance and relationship management and partnering and achieving mutual results. Partnering and achieving mutual results, narrowing the scope of what you want to achieve together and having a plan together as to we're going to get out of here in 10 years, okay, or five years or 20 years, whatever, and we're going to sell out when we get to a certain point because we will have exhausted our resources and our opportunities and it's time to go on to something new as a serial venture, serial entrepreneurs, and so the issue is at each stage, just think about what you're doing and learn how to plan. And also it's like you have to remember that all your deals in consulting and in closely held business it's closely held, which means you all you have the modern fights internally, uh, and it's not public and you don't have to disclose this, but you still have to have the conversations yeah, yes, and so after reading.
Speaker 1:So one of the companies I I own or run is I've got two other partners and after reading your book, I went straight to them and said, ok, we thought we'd sorted governance, but actually it's a lot more complex than you thought. And so we've now, thanks to you, we've now got a set of documents. And having those conversations was so necessary because you know things that you take for granted. You know that you're not going to die that one of you. You know that you're all going to pull your own weight, um, and that you know nothing. No significant life events are going to change the partnership. All of those things can't be taken for granted. Obviously, and I guess in some ways, I guess you're like a surgeon in many ways, in that you know people walk around assuming full health and continued health, but you see it, you know when it, when it goes wrong.
Speaker 2:I guess well, I see it at the beginning and I've seen recently I've had a case where three people got together. It was originally 50-50. Then it was 45-45-10. And the 10 ganged up with one of the 45 to oust one of the other 45. Wow.
Speaker 2:And the issue is they had discussed the concept of vesting, which is, you're not going to own all your 45 because you haven't done all the work. That goes to the point where we can sell out the company, placement co -founder, surrogate co-founder and entice them to come in on the equity basis there, give incentive compensation. So the vesting delays the ownership and there are different structures in the law to do this, but I don't want to go into that right now. So the first issue is are you fully vested at the beginning and if so, why? And what are your assumptions? And can the corporation or the entity recapture your shares at par value, which is sort of nothing, in case you don't do a good job or you retire, whatever? So there's good levers and bad levers and there are people who leave because they can't. They can't help it. So that's the first issue. And once you get over that issue, then the issue is well, how do we keep? We're working for the enterprise to grow and succeed, because that's really what you want, like your baby.
Speaker 2:And in a very similar, corporate divorce and family divorce are not so dissimilar.
Speaker 2:Okay, because you have a baby, you need to to share the baby, but you, you know, you don't want to take advantage of the baby either.
Speaker 2:So, uh, investing, then making sure that the corporation and the entity has the right to survive and so it has all the intellectual property it needs, assigned by you in consideration of your shares, and that you're not going to compete with it and that you're going to have a decent exit strategy, a decent exit strategy.
Speaker 2:And sometimes you know you want to buy out a partner and you want to pay him full price, but you've got to think about what's a way to do it that's financially feasible. So, in a sense, the buyout needs to put the bought out partner at risk for a little while, because everybody want, everybody wants to see the organization succeed. And if the organization, if he pays out all the cash, there's nothing left, well then then that's that's a failure of the of a resolution. So there's balancing of risk in any exit which is an agreed exit, and there there are also ways to basically keep everybody on track, and that's the goal. Smarter business exits requires a smarter exit intelligence, business exit intelligence, and so it's both emotional and it's where do you feel, where the other people feel, where they're going.
Speaker 1:And that's part of your partnership. Yeah, great, and certainly from a buyer's perspective. The less complexity involved in governance and ownership, the easier it is. They like simple stories and simple transactions.
Speaker 2:Oh well, listen. So let's talk about the buyer's perspective. I love the buyer's perspective. So there are two types of buyers. One's a strategic buyer that just wants to integrate a smoothly running machine into their operations, and the other is a financial buyer that can basically hands on staff, people who are going to restructure. You, suck out all the information and then fire a quarter of the people just because it's too expensive.
Speaker 1:Okay, allegedly.
Speaker 2:So in the strategic acquirer, they're looking for something which has a very. In either case, you're looking for well-established business practices and so I do a lot of work with technology, software development, software as a service, information platform as a service. Everything is now computerized. So you start with a good business practice that's efficient and well-written it's, it's enrolled in some kind of manual that you have, so that's something which is a transmissible asset. It's called your intellectual property, mm-hmm, and you develop that and everyone contributes to it and you have a team effort. That's great. But if you're, if you don't have a platform for that, you're just a bunch of independent solo practitioners running around, and I've seen in law firms independent solo practitioners. They don't really help transmit anything and all they're doing there is surviving, and that's not good if you're thinking about growing the firm or growing transitioning to a next generation, and you start thinking about this when you're 50. So you're not struggling when you're 60.
Speaker 1:So yeah, yeah, Now listen, before we get on to some of the sort of you know details of the challenges and lessons that you've learned and things, I was wondering if you could tell us a bit about your law firm. So I specialize in consulting firms and I understand them very well and I know that you know culture and you know a unique value proposition is quite important. Is that the same in law firms and, if so, where does your firm sit there?
Speaker 2:Well, product differentiation for law firms is based upon personality. Okay, and I think that the leader's personality, the founder's personality, is that of, in my, my situation, an international perspective and innovation. And it came to. I was lucky enough to study law in France for a year and I was, I was struggling because I was a foreigner, I was a minority, I was the only member of the law faculty and I had to get by. So I made a lot of friends and I learned a lot of things about, about, uh, I adapted and so so I learned culture. I compared my culture to others, so I learned culture. I compared my culture to others.
Speaker 2:In university, I studied the history of communism in the Soviet Union. I even studied the history of the UK. All right, oh, wow, I know 10 to 56, but that's for you guys. Yeah, yeah, okay. So it's really cultural awareness.
Speaker 2:I think we're all focused on cultural awareness. We're members of international bar associations and we know a lot of people in different countries. So we do comparative law and we respect the fact that a lot of other people have to speak a foreign language. When we don't, we just take it calmly. So that's the international culture. Then there's the issue of innovation and my first real client was a young fellow who was a one-third owner of a software development company and he was being asked to give a personal guarantee to a bank loan when the company was going south and I said, no, don't do it. So with that I went into both corporate and divorce and I got into technology and I've been basically thinking what are the algorithms, what are we learning? How can we improve them? And it's taken me all the way from plain software development to artificial intelligence and machine learning.
Speaker 1:Listen, just to interrupt. There. I'm reading a great book that you'll really like. In fact, you may have already read it. It's called the Future of the Professions. Highly recommend it and it covers, you know, a lot of this stuff in all the professions, but especially law and consulting.
Speaker 2:Well, in law and consulting things that are generic tasks can be fixed but can be done by robots. So the value that you have is identifying what the robot is screwed up on and giving advice so they don't get there. And I've seen situations now where people are in corporate divorce because they took the off-the-shelf thing and they got real cheap and they have no clue what they missed. Okay, okay, so it's cheap for a reason Sure focused on treaties, globalization and localization of national interests, police powers and protections and regulations and compliance. So I have a combination of comparative law and intellectual property, employment and corporate governance across borders.
Speaker 1:That's quite a wide. Did you start off quite focused and then build up that?
Speaker 2:diversity. So I got kicked into it. Okay, I was an associate at a 60 lawyer firm. I said I need help on this lease for a commercial client and the head of the real estate department says oh, we're too busy with big, big clients. So here's this commercial client and the head of the real estate department says "'Oh, we're too busy with big, big clients. "'so here's this small client "'Look, I'll give you a form, you can figure it out'". So what I learned was I need a form, I can figure it out, I can handle it.
Speaker 1:And.
Speaker 2:I'm in a life of learning and it's not that I'm expecting to be great at it. I'm not an expert in every aspect of everything, so I I know what I did. I try to identify what I don't know and get a partner or a insider outside to assist in those things which are outside my jurisdiction. I can't practice law, so certain places or outside my can okay, now it on.
Speaker 1:On that note in in the book you mentioned delaware a lot is that now I know there are, I know there's significant um tax advantages to operating in some us states and cities. Um is, is that why it's mentioned a fair bit or is that a special type of law?
Speaker 2:Delaware is the de facto American corporate law, because it's what you expect of something normal and fair and equitable with a court of chancery. Not every state has a court of chancery for resolving disputes among shareholders and and other rights holders. Uh, in corporations, delaware has a court of chancery and they're very good. So these, these, these people, these judges, know their stuff. Yeah, they focus on that law. So it's like having a commercial division in on that law. So it's like having a commercial division in a general court, but it's actually it's a corporate division. So that's for the adjudication and for the corporation rights. They allocate rights and responsibilities in a fair way. They're predictable, they provide a lot of flexibility and they don't give, like California, special dispensation to local resident shareholders.
Speaker 1:Here in.
Speaker 2:California if you wanted to do a dissolution or something. The corporation has to explain to the shareholder exactly how we can defeat the operation.
Speaker 1:Okay, okay, okay, okay, right, okay, okay. So there's a few, there's a few sort of details that I want to. I want to dive into that. I certainly I've come across a few times. But before we do that, if you had a I'm thinking about a standard client of mine sort of you know, maybe two or three partners maybe been going for five years. They, they maybe had, they've got their articles of association or whatever the formal documents. Um, they probably don't have a governance agreement or a partnership agreement. Um, they've got a mutual understanding, perhaps, what? What are the two or three bits of things that you would say? You know, you guys need to get on this sooner rather than later.
Speaker 2:So first one is veto rights. The second one is force majeure Okay, and the veto right means that if someone is proposed that they take action which you just can't stand, then you can either veto it or you can quit. And then, if you quit, then the issue is how do you get bought out? What's the value of your assets? Is it valuable at all? Is there something left behind, what to do? And the second issue is in the force majeure, where I might become incapacitated for six months, I may need a cure, I may have COVID for three to six months or something like that. So what we have there is you can't predict everything, you can't control everything, but you need to think about what happens in an emergency. And those are the minimums, just the minimums, okay.
Speaker 1:That itself is really useful advice. I know that some of the listeners will definitely take action after that. Okay, so I wanted to go into a few more challenges. Something that stood out that I hadn't paid much attention to personally are the different ways minority shareholders can be categorized, different powers they can have depending how you frame them. Could you explain why that's important?
Speaker 2:Well, so the minority shareholder, the minority has a minority vote and minority ownership and minority control. And the normal rule in Delaware and everywhere else is majority rules and there are certain things that you want to avoid having the minority control. That the majority a small majority. If you're having a large majority, two-thirds. It used to be.
Speaker 2:It's funny in New York state law it used to be that two-thirds of the shareholder approval was required for a merger and now it's just 51%, okay. So if you're a 45% shareholder, it makes a difference whether it's two-thirds or a majority. So you might say we need two-thirds or even in some cases, 80%, or actually 80% is useful for tax purposes because that does tax-free reorganizations and things. So if you get the percentage in which the minority can veto or control, so that forces the majority to concentrate on what's achievable and what's reasonable, and for a merger, if you're going to be merging your, your entity, you want a little bit more than 51, okay, I? I think that because otherwise you're going to have people and if you don't, who are in the minority and they may oppose it and then they will try to defeat it and that could reduce value for everybody.
Speaker 1:Yeah, yeah I guess, if that, if that the law provides a framework. But if you've got personalities that are, you know, intent on causing trouble, then you've got, you've got a big problem on your hands. We never, we never have egos, do we no? Especially in consulting. We never get egos in consulting, um, okay, and and how does that work? So, when you're coming up to a sale, um, and you've got, you've got, uh, you've got the majority shareholders in, you know enough to take the decision let's say it's two-thirds in this situation but you've got and this is very common you get one or two shareholders that either say it's the wrong time or it's not the right price. These are minority shareholders. Now, although they can't hold up the sale legally, any buyer is going to be aware of what damage they can do if they withdraw their labor or if they decide to leave, I guess.
Speaker 2:So this is what are you selling and what is the asset being sold? You're selling bodies and you're selling know-how and goodwill, customer relationships and continuity. And what I love is annuity revenue stream Yep, sure. So now the strategy for the majority is to define annuity revenue stream to maximize. So we want to get the best clients that we can.
Speaker 2:So it's always the challenge to always target the ideal client. It's important to define who is the ideal client and what you want to sell to that and and and then secondly, um, you want to have the assets on board that are in-house in your, your form collection. You know, I've got I've got directories of clients and we have a form file, and the form file is basically all those things that we stole out of some other deal. And then we looked at it and said, okay, it was close enough, we'll look at it as next time. The possible forms were up. Yep, and so that's part. How do you develop your assets? And then you also have the issue of the training of the juniors. Okay, because the training of the juniors is essential, because that way there's a transition, there's the value, and that's something training of juniors is for your own benefit, so that you don't have to do the work you don't want to do, sure.
Speaker 1:It's interesting how and in the book as well you don't. Your advice isn't just at the legal level, you also go into sort of you know good practice around leverage and training and you know all these other things. Is that something you advise on with your own clients or with this stuff that you've just picked up over the years that you enjoy?
Speaker 2:uh, understanding well, yeah, I mean, I, I have, yes, uh, I I look for systems, I look for compliance, I look for, uh, a group of people you know, all of this covid thing has taught us about business continuity, planning, disaster recovery, recovery, business resiliency, supply chain management, transparency up and down, multiple levels of the supply chain. And now law firms and consulting firms don't have a big supply chain, but they do have reliance on accounting firms, financial firms, banks and others, so they want to know that they're dealing with people who will help the enterprise survive. And so, yes, as a lawyer, I have to look at the gestalt, the whole enterprise, and feel that I know who's in the HRr department, I know who's in the it department, I know who's in finance and I asked him what are you doing about this and that? And I'm not really acting as a consultant, I just want to make sure that I don't have a disaster tomorrow.
Speaker 1:Yeah, yeah, okay, okay. So listen, we covered a little bit of sort of the minority shareholders and we covered a little bit of, you know, some of the trouble that can be caused when by minority or others coming up to a sale. What are the other common challenges that you see when people come to you, perhaps approaching a sale or during a sale?
Speaker 2:So in a sale I have a questionnaire and the questionnaire, because I'm the buyer, the questionnaire is 15 pages of show me everything. And so, as the seller, I'm saying, okay, are you ready to show them everything? And the everything goes to all the value of the, goes to the security of the value that's being purchased and in the representations and warranties you, you certify that all the disclosures are very true and accurate and so that therefore, the, the evaluation can be um approved. One of the big issues in, one of the big issues in acquisition is surprises that cause material adverse effects.
Speaker 2:Sure, okay, but that's sort of like the exception of the lawyer scheme the scenario risk analysis when you lift up the floorboards and find the rot, I guess. Well, finding rot, if the seller knew that there was some rot, seller's got to take a hit. And what's so? In the M&A situation, there is the question of how much risk does each party take after the transaction, and there's usually a limitation of liability. There's usually a cap on liability for breach of warranties and there may be different multiple caps depending upon tax liability, unlimited breach of warranties limited and a durational gap. So you have to discover the stuff within six months or a year or two. And then there's also the issue of whether the seller is going to be collaborating in the transition, and that depends upon whether there's an asset.
Speaker 2:If the seller is trying to retire or move on to something else, we're continuing retire or move on to something else or continue. So you know, the contracts basically have to cover all of the assets. And the valuation issues, yeah, yeah, and the valuation issues are remember there's comparables. And then there's discounted cash flow, and it's discounted cash flow and it's not just the investment Startups. Forget about startups. They have astronomical numbers for nothing. So what you're trying to do is you're trying to support the cash flow analysis that supports the purchase price.
Speaker 1:I guess one thing to emphasize here is also that you know, especially private equity buyers. You know they very often will have done this you know 30, 100, 200 times, and so they're not stupid when they're making these deals and it is quite a common. There's various tactics that they can use, and I think you mentioned a few of them in the book in order to minimize the price, and something as obvious as just dragging out the due diligence process so that the seller gets anxious and will sell at any price, or even setting targets for the earnouts that are unrealistic, so they end up with a greater percentage. So it's something to be wary of, especially if you're I guess if you're completely new to selling a business.
Speaker 2:How many people are selling a business? They're not experts at it yeah, okay. Many people are selling the business. They're not experts at it yeah, okay. So, um, I think one of the things that I love about this plan for selling a business is, if you plan two or three years ahead, you basically, every month, you, you test yourself against your, your targets, and your target is growth, stability, predictability and and focus on the right clientele, and instead of that, you have something transmissible yeah, yeah, it's.
Speaker 1:um, there's a great, there's a comment, the name of the document, my brain my brain isn't what it used to be, but up on my website I've got a checklist of questions that people can be asking themselves. But I know in your book it's quite good, because you've got a series of checklists that buyers can, sellers can, go through in order to make sure that they're approaching the sale correctly. To make sure they're approaching the sale correctly. A confidential information memorandum is one of the things I, even though it's towards the end, is something I get my clients to look at quite early on in terms of the information that the buyer's going to need. Firstly, do you have it? But secondly, are you performing well and transparently on those criteria?
Speaker 2:So actually, the biggest thing I think will create value for you on your exit, if you're going to sell, is that you have a plan You've strategized for two or three years. You're consistent in your accounting process so that you can a plan you've strategized for two or three years. You're consistent in your accounting process so that you can't be accused of accounting changes or sloppy accounting. You've got growth and you're growing into something new. It's like I might be growing into blockchain, because blockchain is something few people understand and can provide tremendous trust and value, but there's a question of governance and control, because what if you need to change one iota in the blockchain and authority to do that? So, uh, it gets to governance, asset management, resiliency and cash flow, and each of these is no, these are not legal issues. These are business issues which are essential.
Speaker 1:And do you find that varies on the size of the firm? Do you find that different problems come to the fore with larger firms compared to smaller firms being bought, or with larger firms compared to smaller firms being bought, or Well, with smaller firms.
Speaker 2:I find that the founders have not done much to plan for their being replaced. Yeah, sure, and so there is a certain indispensability and there's a refusal to share knowledge. Yep, knowledge management is the biggest issue in this economy. If you have access to knowledge, you have access to sell and to buy and to evolve. And so what I've seen in your partner they're not sharing and they never did so the issue for a viable organization and, frankly, if you're an equity shareholder in an or in a partnership, you want to have everybody else contribute an asset of continuing value and you'll, you'll agree to that, because you're not going to be working forever. You want to be able to go.
Speaker 2:I won't say play golf, you want to be able to do something different in your life at some point, or you may be prevented from doing something. So you, you need to train, you need the, the formality of, of an aspect and anyway, I just I can't, I can't say how important it is to have that plan, to have it to be ready, and you know if something, if somebody wants to leave right away, and they, they split, okay, so you have a split off agreement, so you know you can adjust. But the question is what do people keep, what do they take and how do they value it?
Speaker 1:Sure, Sure, that's great advice, thank you. And I guess something related to that is when you know again, it's very common start off a partnership, maybe have three to five partners and either through ill health or perhaps one of them gets a bit lazy, people start to one partner isn't pulling their weight. Now, obviously some form of incentivization or renegotiation can take place there. But does that presuppose that you already have an agreement in place that if a partner isn't pulling their weight that you can renegotiate these things?
Speaker 2:Well, so how many partnerships are based upon a management committee that decides everybody's compensation every year? Okay, the management committee decides and partners don't decide. Management committee dictates and one year you're up, one year you're down. And so the issues are do you trust the management committee? Do you trust the process, and why should you? Okay, it's very difficult Partners.
Speaker 2:I've seen partners who can't pull their weight for different reasons. I should tell you I had that situation hit me. I had a client where I was under diversified and I had one client who was like 60% of my business and they said Bill, we love you. How would you like to be in-house counsel? I said, where Illinois, Northern Illinois, in the winter? My wife says you can go, but don't count me. So I basically looked around and I had to re-business. I helped hire my successor in the in-house person and they built a little team around that person. Fine.
Speaker 2:But I had to restructure, and so the issue is what help will your partners give to you to restructure so that you can last more than a year or two and grow and you're not giving a burden on them? So you may take a cut in pay and that's a lesson for diversification and you may want to spend some money on marketing and really focus your efforts on your persona and your expertise and why you're the go-to person for a unique problem. That's highly valuable. Okay, so you've got to adapt. None of this is just planning Disaster strikes, and so everybody has to be willing to adapt. My adaptation actually turned out to be the reason why I have my firm, Because I was looking at the structures that I would be committing to go into and the risks that I'd be taking and the assets that I could play with, and I was not in a strong position. So I was stronger on my own than staying put. Okay.
Speaker 1:Okay, that's interesting. There's one one, uh well, it may probably not a final thing, but there's one thing I wanted to to ask and there's a wonderful, it's a wonderful section in your book and you you're going through the common triggers of crises and you talk about the personality disorders of sinners from Dante's Inferno. I just, I just wanted to know, out of out of incontinence, violence, fraud and the others, I guess, what a more serious question what personality issue tends to ruin deals? I mean, is it just bad luck, or is it generally someone trying to game the system or get more, perhaps unfairly, than they're due?
Speaker 2:That's a great question. The issue is really not so much the individual but the alignment and interaction of the individual with others. Okay, whether you have a community of like-minded people who are sharing core values, and because if you share core values, you can resolve things. That's what marriage is about resolve things. That's what a marriage is about.
Speaker 2:And if you have someone who is, I, I actually have, um, a situation which, uh, where a female except a female executive was a minority shareholder and she wasn't getting what she wanted, uh, from um, she was getting paid very well, she was in charge of everything, but she, she, she didn't like the ce, she didn't like the chairman who was majority owner, and basically thought that he, she wanted to get rid of him, and so she organized an employment attack. So this is in the dante's inferno, the, the, the person who's at the worst the ninth circle of hell, is the person who is in your family, who is cheating you. Okay, so what she organized was she knew the chairman had a temper, and so she had a meeting with other people. She intentionally caused a row, made them have the desk and yell and all sorts of stuff. She invited him. So then she writes to me.
Speaker 2:Oh Bill, I'm scared. Well, now I've got a hostile workplace environment, in addition to a minority shareholder who's got breach of fiduciary duty claims Wow, all orchestrated. So when you think about your personality, identify whether the personality of the person across the table is going to go crazy and ballistic like that. Now, what that did was it precipitated a sale of shares, which was fine. The problem is that that exposed the chairman and the company to a high cost hire because they'd have to pay off the alleged employment harassment and also workforce problem, which they could have gotten around if they just decided something else. But this is a personality schism and she was in the family and she and you talked.
Speaker 1:there's a mutineering of family okay, wow, wow, I mean it, I mean it's. It's heartbreaking in some ways, isn't it? Because when you know when it is, when you, when you've built a company or when you've actually got real family involved, it can you know. I've sadly seen a couple of situations where you know people are no longer talking to each other. I guess you see that a lot more than your average advisor.
Speaker 2:Well, not talking to each other after they've been expelled, that's fine, because they or they've quit or so bought out. You know that's okay, and I do. I actually have a mediation bent. I'd like to, as attorney for the corporation or the entity, I want people to support the entity because if they don't, they all lose. Support the entity because if they don't, they all lose. And so my goal is to accommodate where reasonable and to show value, and maybe there's a way. If you don't like people and you say I can't work with you anymore, let's find a solution where we sell out. I had a case where a guy there was a 50-50 and one of the 50s borrowed half a million dollars for the company without approval of the other, just took the money out, wow. And so the question is what are you going to do with a guy like that? That's criminal fraud.
Speaker 2:Yeah yeah, that's larceny. So rather than take the guy to put him in jail, we said okay, how would you like to sell the company? You can sell it first. We'll give you 60 days. If you can't find anybody, we'll sell it and you're gone and we get priority because we by the way, the other 50 had lent money to the company. Okay, wow, they should have taken 95% and let the other guy have five, but no, that wasn't the deal.
Speaker 1:Yeah, these percentages are difficult. I'm advising a firm at the moment and they're going through fantastic growth. Two partners, no, three partners they set up together. The third one decided it wasn't for him and went off. They all put money into the company. He went off and did his thing, but since he, the company's grown and grown and grown, but they never changed the shareholding. So this guy still gets 30 percent of something, that's, you know, 10 times the size of when he left it. And I won't go into the details of why they did, because you know why they didn't have that conversation. But now they've got to have a much trickier conversation, which is obviously how much do you need to give us the shares back?
Speaker 2:Well, actually, this is an interesting question. On one hand, he's technically a shareholder and entitled. On the other hand, he's probably also a partner or a manager, and as a manager, he has a fiduciary duty not to be self-dealing. And if he's not contributing, then is he self-dealing? And I would argue yeah, he's going on to do something different, which is taking away from value. Therefore, I'm going to hold you liable for self-dealing and I'll pay you a fair market value, net, net after deduction.
Speaker 1:Wow, okay, this is why we like lawyers on our side. Well, okay, well, you might be getting a phone call from at some point from one of these.
Speaker 2:I'm just happy to help people get moving and I mean it is.
Speaker 1:It's interesting from a consulting perspective because the value of a consultant is obviously that you, you see things dozens, if not hundreds of times that most managers only see once or twice in their lifetime. But it's exactly the same with you. You know, you see things day out that you know most, most buyers will actually never see, because you know a lot of sales go through without any, without any issues. It's a fascinating job.
Speaker 2:Well, my goal is to respect everybody and to give them something fair, and I think that if you present it that way, things will work out well.
Speaker 1:Okay, well, that's good, and I like the bit about personality and trust and having that common value and culture. It's something that I always emphasize, in terms of values especially. You know, it's better to recruit someone perhaps not quite as bright, but with the right values than the other way around, and that's another good reason to emphasize that. Now listen, I realize that we haven't got a huge amount of time, but is there anything that we've I mean we've missed a lot of things, but is there anything you know important that we should cover before drawing this to a close?
Speaker 2:should, um, we should cover before drawing this to a close. Um, the point of the book is basically, I'm going to start with the end in mind. Okay, and and have business, exit, intelligence and have a plan. Um, it's a little bit more cost at the start to hire an attorney to, or or any plan and and have some kind of protection for the enterprise. But if, if, you want your, as that, to grow, you have to be willing to concede that the asset may be bigger than you and at some point you may need to leave, but you want to do it on fair terms, and so that's, that's really what's customary.
Speaker 2:Why are you doing this? What do you want? How long do you want it for? I mean, you're not gonna be, you're not gonna be wanting to practice, to be in consulting for 50 years. Okay, you had enough of that somewhere. No, and life expectancy is gone. So, um, basically, uh, you need a toolkit for planning, for dispute resolution and for governance and and uh, governance, uh, you know these public companies have governance rules. They set up all these structures. And for governance and governance, you know these public companies have governance rules, they set up all these structures and board resolutions and Securities and Exchange Commission requirements and the purpose of that is to keep the enterprise going. And if you have good governance in many different ways you have monthly board meetings, you have disclosures of problems and resolutions and accountability. All of these things are what create and maintain the trust and I want to work with you again and continue. I'm very happy to work with you. We're a great team.
Speaker 1:You do this, I do that, we work together on projects and etc well, I guess, with your background, with your study of Soviet history, I guess the Americans always said you know, trust but verify.
Speaker 2:Which could be a tagline for the book, couldn't it Well, you don't know about Stalin, huh, yeah, well, yeah, yes, yes, it's a little bit more. Now I look at the chinese system and the chinese have always had a centralized system and uh, so the issue is what level of of disputes and what level of freedom to express and independence, and in a sense, they're very good. It's certain stuff that's repetitive, but what you want is you want people who are innovative, creative and hard workers and also team builders, and that's a really hard person to find, but I think, with today's millennials, they want something and they want that and they want more.
Speaker 1:They want good works yeah, definitely, I can really see with my students, it's um. I always ask them every year. I ask you know what percentage of you would leave a job because of bad work-life balance? And up until covid, that percentage had increased every year. Um, and it's, I think it's a good thing. You know, it's um. I think we've all seen people that spend their lives, you know, eight in the morning to late at night, um, and you know, suffer the consequences. Well, listen, talking of overwork, um, listen, you, you. You also mentioned that you were very kindly going to put a, a chapter, um, oh, yeah, okay, so let me.
Speaker 1:Let me share a screen here yeah, you share the screen, so we're going to put this up on the um. We're going to put this up on the website, so okay fine.
Speaker 2:so here we go. Okay, so this I have restructure. I have two chapters of the book which I made into separate books. There's like 30 pages each. Okay, this is restructuring, which is one alternative, and then the other is international structures, strategies. Okay, so designing for sale from the beginning. For sale from the beginning, yeah, and you have internet and international is requires even more approved good governance and that's why you have separate entities where the entity itself is the from the structure for the governance and you deal with the operations by cross licensing, by service agreements and purchases and sales, which are all accounting and functional, but it's the governance holding company which defines where you're going together.
Speaker 1:That's fantastic. Thank you so much, bill. It's been a real pleasure talking to you and I do recommend people to use this book because I fortunately found it before I finished writing my own book and it meant that I could improve let's not say correct, let's say improve a lot of my legal understanding of the exceptions that you wouldn't be exceptions. But when things do go wrong if you're not prepared for them, it can be pretty terrible.
Speaker 2:So just keep telling them to plan, plan, plan and help them and ask them questions and you'll. Instead of being the one the guy on the left who's being expelled, you look at the people on the right who are going out as a team Brilliant.
Speaker 1:Okay, thank you, bill. Okay, thank you so much.
Speaker 2:Joe.
