How we built a business out of recession - chapter 51 - the final hurrah
The story of CitNOW*
This is the 51st chapter about CitNOW, the company started from a kitchen table in Winnersh, Berkshire. If you’d like to read from the beginning, here’s a link to chpt 1. Each chapter is a 5-minute read. It’s an early draft of a book.
CitNOW was founded by Andrew Howells and Donna Barradale in 2005, although the company was only registered in 2008. In February 2018, we sold the company to Tenzing, a UK private equity company. It has been sold again since.
The due diligence that KPMG undertook also included meeting Donna and me. By then, they had a good understanding of the business, had met Alistair, Claudia** and Geoffrey*** frequently, and had a handle on our technology from Colin and Michael****.
We were one of those final stones which needed to be turned - a final check, despite everything that would have already been shared. The real secret sauce in the company wasn’t about to walk out the door.
No one need have worried.
I expect Alistair was also vaguely respectful for once. He didn’t want to rock the boat any more than we did. It was important to present a united front, and we were never asked about his suitability.
KPMG had seen it all before anyway and would have formed their own opinion as to how the company ought to be pitched and whether there were weaknesses which needed addressing. It was also standard practice to downplay any leavers because they weren’t going to be part of the new company when it was sold.
In the prospectus, we were part of the existing structure, marked as leavers. I’m sure in conversation, we were the founders of a rapidly expanding, successful company which had now outgrown us. The real stars of the show were the remaining shareholders, which is precisely as it needed to be.
It was business as usual while KPMG fished their networks in the UK and the US primarily. There was a deadline by which potential investors needed to show interest. I think five soon became three, after they’d all done their initial due diligence.
It’s an interesting exercise because it’s not only about finding a potential buyer, prepared to pay the asking price (or make an offer), but also whether the remaining shareholders think the buyer is going to be a good fit. On the other hand, the leaving shareholders have far less interest in the buyer and are more likely to favour the highest bidder.
In our case, there were only private equity companies interested, so any trade sale was immediately off the table. That might have been concerning for at least one person, because CEO turnover is exceptionally high with these buyers. Nearly 60% are replaced within two years.
Of the three potential investors left, one quickly disappeared due to their unrealistic expectations regarding control and its implications. Of the other two, Tenzing appeared to be the best fit for the remainers, and they were still talking about a £30m valuation. It seemed that everyone’s expectations might be met if Tenzing were still interested once all their due diligence had been completed.
When Geoffrey asked for an extraordinary fee of £50k on top of his usual one for continuing to manage the company sale, in our now infrequent meetings, the leavers flatly refused. Angela pointed out that whilst he might have been working hard for the remainers, there had been zero communication with the leavers. It felt like we’d become the leper colony on the island, an irritating adjunct, which couldn’t entirely be ignored.
I’m not sure why he thought this was appropriate behaviour. We knew the remainers, especially Alistair and Claudia, were working hard. But it seemed naive to disown us, given that the deal was still far from done. Perhaps Geoffrey’s lazy gene streak was getting the better of him?
He argued that he’d also been working hard on our behalf. Given the lack of evidence, we suggested that he should contact Tenzing to request his bonus for all his hard work on a successful completion.
Relationships were more strained than usual during this period, and the lack of communication didn’t help. Alistair was determined to try and get the deal done by Christmas 2017, even though KPMG was already using rhetoric like, it’s going to be very tight, in the November. He planned to use the Christmas party in December as a time to announce the purchase by Tenzing.
The format was usually that everyone gathered for lunch at the chosen location before we had an afternoon of business presentations. These were never too arduous, and we tried to make them as entertaining as possible before the evening dinner and DJ for those who felt so inclined.
I’d organised everyone except for this one. Each year, it was slowly getting bigger, with a bit more in the budget to accommodate everyone as comfortably as possible.
I felt particularly proud as I entered the auditorium for the afternoon presentations this time. We now looked a lot like one of the many automotive conferences I’d attended in the past. There were maybe 120 CitNOW staff already sitting there, waiting for the festivities to begin.
We’d asked to be seated in the crowd of tables with our staff, rather than be conspicuously awkward at the front. I noticed that the two Tenzing representatives had done precisely the same, merging in with staff at another table, perhaps wondering about Alistair’s presentation and what he might say. They disappeared after the first tea break, and we didn’t get a chance to talk to them.
Alistair opened proceedings.
The slide in the presentation about Tenzing was still there, but the announcement was blurred out. He made one or two jokes about worse kept secrets, but the reality was, the deal still hadn’t been done. I couldn’t blame him for saying that it was just down to formalities, because that’s what we’d all been led to believe at the time.
Alistair had been kind enough to ask me whether I wanted to speak when the agenda was being put together. I dearly wanted to, but I declined because I thought it was more important that everyone looked forward, not back. The future would hopefully not involve Donna or me, so anything I said would at best be counterproductive.
However, if I’d known that Geoffrey wasn’t going to make any effort at all, I would have taken up the invitation and opportunity to have one last whirl.
Instead, we had to listen to an old Sytner presentation that he’d dug out, extolling the virtues of going the extra mile for customers and never taking them for granted. At one point, he appeared to be telling everyone off, remarking that we could all do better. Had he forgotten that CitNOW was a B2B company and not a retailer? Did he care? It also didn’t make sense. Our customer support was always fantastic.
The new year came and went. Progress was still being made toward a satisfactory conclusion when Tenzing introduced a new dimension to proceedings in the third week of January.
They played an absolute blinder.
*CitNOW was our company’s trade name before we sold it in 2018.
**Claudia was our second Financial Director when we sold.
***Geoffrey was our non-executive Chairman.
****Colin and Michael were the two remaining technical shareholders in Stirling.