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Management of a Privately Held Company

Executive Skill & Acumen is Non Transferrable

The NFC Championship game on January 18, 2015 featured the Seattle Seahawks and the Green Bay Packers. Pete Carroll and Mike McCarthy planned and executed their strategy with the support of their coaches & players for success in the game. Ultimately, Pete Carroll and the Seahawks were successful in a memorable chain of events. However, I do not believe enough credit is being given to Pete Carroll for the superior job he did preparing for and coaching the game. The successful outcome started with the defensive game plan he prepared and had his players execute in the game. Green Bay averaged an NFL leading 30.4 points a game offensively during the regular season. Sunday, the Seahawks defense held the Packers to 22 points, 27% below their average, and out of the end zone three times in the first quarter when Green Bay had an opportunity to score touchdowns. This provides a clear example of an executive outperforming another executive in a competitive situation. Pete Carroll’s defensive strategy execution was simply superior to Mike McCarthy’s offensive strategy execution. This analysis could easily be applied to compare marketing strategies employed by CEO’s for competing products, a business world competitive environment where winners & losers occur annually in terms of revenues & market share. Pete Carroll also demonstrated superior situational acumen when he elected to fake a field goal and put a plan in place that resulted in his team’s first touchdown. This innovative decision in the situation was prepared for prior in the week, delegated a new responsibility to a person (Jon Ryan had never thrown a pass in an NFL game prior to that play), and caught the opponent unprepared. This analysis could easily be applied to a company’s research, development, and initial product rollout related to a new product with the success or failure of the plan occurring in the consumer marketplace. In addition, Pete Carroll provided positive executive leadership prior to and throughout the game to create an environment where effort & attitude remained positive despite a chain of negative events that could have easily resulted in Carroll’s players giving up, making excuses, or placing blame on each other. This did not occur for the Seahawks in the NFC championship game or during a season when adversity occurred in terms of injury or field misfortune. How executive management reacts to adversity is a critical component to building a positive, dynamic corporate culture. Pete Carroll, John Schneider, and Paul Allen have created a corporate culture with the Seahawks that is positive, recognizes achievement, and provides an opportunity for advancement that is a model of success that any company could emulate. Finally, the same executive team of Pete Carroll, John Schneider, and Paul Allen had the confidence & acumen to make the decision to “fire” one of their most talented players, Percy Harvin, when his personality & effort were not reflective of the corporate culture they desired to create. Difficult personnel decisions face management executives commonly. The best executives have the ability to recognize that talented individuals periodically need to be let go to take a company in a new direction or to create the desired corporate culture. The Seahawks have one of the best executive teams in place in the NFL. The excellence of this group can be observed in every aspect of management.

I shared this analysis to help illustrate a component of a transaction involving the purchase & sale of a privately held company that is not commonly highlighted. Evaluation of a business by a buyer will assess a company’s tangible assets, products and/or services offered, market share, revenues & profitability, personnel, patents & trademarks, customer & vendor relationships, and upside potential. The one component of a company that is difficult to quantify is the impact of ownership on its performance. Traditionally, the current owner involved in a business sale will exit from an executive management position with the company after a negotiated transition period. The transition of executive management will result in new management that is better or worse than prior management. The only known fact is that management will not be exactly the same after the transfer of control of the helm of the business. In my 20+ years as a mergers & acquisitions professional, I have come to the conclusion that it is impossible to predict the success or failure of business buyers and management executives. I have witnessed individuals with relevant prior experience and advanced degrees from prestigious educational institutions damage or kill successful businesses and individuals with limited education, but an excellent work ethic and strong business acumen build companies into market leaders. I have also observed with regular frequency businesses growing in terms of revenue, profit, and market share post acquisition due to the injection of new enthusiasm into management and a fresh set of eyes evaluating and addressing opportunities & problems. It is also true that time & circumstances can impact success. Pete Carroll provides a case example of this truism, as his achievements as the head coach of the New York Jets and New England Patriots pale in comparison to what he has been able to achieve as the head coach of the Seattle Seahawks.

IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, and mergers & acquisitions community on subjects relevant to the purchase & sale of privately held companies and family owned businesses. IBA is recognized as one of the best business brokerage firms in the nation in terms of successfully negotiating transactions that are “win-win” in an environment of full disclosure between the parties.