Lessons from our most expensive business mistake

You want to be a nice guy in business, but can you?

In 2021, I met the founders of a business. The founders were two fathers in their sixties, with grown kids who were also in the business. The company made food products and they invited me to visit at their head office. I put on my best suit and drove over to meet them.

Surprise, surprise – I arrive at the office and both families are already crowded around the boardroom table. I have to admit that I was not expecting to meet with so many people.

I felt like a guy trying to ask his girlfriend’s dad for her hand in marriage, while the whole family was watching. Who are you? What are your credentials? What do you do? What are you intentions? Are you committed?

Thankfully, we hit it off and had great alignment. A few days later, I got the dads’ blessing, so we offered to buy one-third of the company. This made sense - now there could be three families growing the business together.

Then came the negotiation process.

We would make an offer, they would tell us why it was too low. We increased the offer. They had other requirements. We met those requirements. They said it was too complicated and wanted something else. This went on and on for months and months. But we had such great rapport that we bent over backward to accommodate these requests.

Eventually, we agreed on a deal and began with due diligence work. If you’re not familiar with the term, due diligence refers to the process whereby you check the company from top to bottom, to see if everything is okay.

Due diligence is the bread and butter of our company (Dass Capital) – our team have done it dozens and dozens of times. So I can safely say, you will always find something strange in a company. But if you know about it you can work around it.

We pulled in mergers and acquisitions lawyers and consultants to bolster our team, and get the best advice.

But by now it was December - holiday time - so we couldn't ink the deal until the next year. I spoke to the founders and they reassured me this would not be a problem, the deal was done and their word was good. I shared the same sentiments – the deal was done and our word was good.

The next year started, we got the lawyers in and started writing the deal up. The lawyers did a fabulous job – I was truly impressed with the contracts. They were thorough and well written. And boring as hell – I can say this confidently because I think I am the only person who read every single one of the hundreds of pages.

Finally, we were days away from signing, then suddenly the founders requested a meeting. My Spidey sense was tingling. I knew something was up and that we were out of leeway to renegotiate. We were also in deep on legal fees and due diligence costs. This was not the time for surprises.

The meeting took place - BOOM. The price is going up, the shares on offer were going down, they want less stringent governance and less comprehensive legal agreements. (Apparently, they didn’t enjoy the hundreds of pages as much as I did.)

The reason for these changes - their upcoming strategy will increase the value of the business, so things have changed. They had not sold a single item yet under the new plan, in fact they had only incurred costs, but the value was up.

In retrospect, I knew it was over right then, but we had worked on this for a year, so out of politeness, I said we would look at it.

A couple of days later, we withdrew our offer and walked away.

No discussions, no negotiations, nothing.

They had agreed to cover half the legal expenses, but now said there were caveats. We were not going to mess around. So we took the hit for all the costs, the time lost and walked away. It was the right thing to do. As they say, if you're in a hole, first thing to do - stop digging.

We try to be accommodating, transparent and straightforward because we want to build businesses together with founders and families. But there is a limit, after which, even a good deal with nice people becomes not worth it. We had reached that limit.

Honestly, at the time, I was deeply disappointed with how this went. A year of work was down the drain.

But the world is full of surprises and within months other opportunities came up. We had never considered these possibilities before, so they opened new paths for us.

In the end, things worked out for the best.

But the question remains: are we still going to be nice guys when we do deals?

The answer is unequivocally: YES.

We are still going to be nice guys, but in future, we will set our boundaries clearly and get commitments when necessary.

(In case you’re wondering, we are still friends with the founding families. Lots of things have changed. So they even called us in to get some friendly advice.)

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