How To Handle A Low-Ball Offer

January 4, 2019 |  

About this episode


You’re excited to get an offer for your company, but it’s not what you had hoped for. You’re tempted to react with righteous indignation – but is that really the best way to maximize an acquisition offer?

To read a transcript of this episode, click here.

Gary Miller is the founder of management consultancy Aragon Consulting which grew to employ more than 150 people. Miller, along with his team, built a proprietary modeling technology and was banking on attracting a premium multiple for the consultancy—which is why he was so disappointed by IBM’s original acquisition offer of just three times Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA). Many founders would have been tempted to react with disgust but it is what Miller did next that resulted in IBM ultimately paying the highest multiple they had ever paid for a service business.

The new year is a great time to take stock of how your business is doing and what you need to do to improve its value over the next 12 months. Benchmark your company now against the Eight Key Drivers acquirers care about by getting your Value Builder Score.

About Our Guest

Gary Miller is the founder of GEM Strategy Management, an M&A consulting firm serving middle market companies on the Sell-Side, Buy-Side and Capital Formations. Miller has been responsible for buying and selling 31 companies and raising over $750 million in capital for his clients. Prior to forming GEM Strategy Management Inc., Miller has served as Managing Director of Ackerman Medical Building Funds, a private equity fund, where he led the formation and organization of a $500 million medical office building fund portfolio.


John Warrillow:                My next guest, Gary Miller, sold Aragon Consulting to IBM. They originally approached him with an offer of three times EBITDA. I will let you hear what he did with that offer and how he got it up. I won’t tell you the punchline, but listen to the interview, and you’ll be astounded at what he did with that original offer. What I loved about his interview, and I want you to listen for his tone of voice, the way he described his negotiation stance with IBM, always respectful, always considerate, always very thoughtful in his response, even though he was killing them with kindness and getting them to bring up their offer every step of the way. Just an incredible, incredible negotiator.

John Warrillow:                Lots of tidbits on the negotiation sort of ins and outs of dealing with a very large organization. He talks about, at great length, that if it’s between an asset and a share sale, a stock sale, I could say, the Chinese walls, and having a transaction law firm, making sure you’ve got those in place. We talk a little bit about the difference between stock grants and options, which I find fascinating, frankly. So I hope you do as well.

John Warrillow:                Here to tell you the rest of the story is Gary Miller. Gary Miller, welcome to Built To Sell radio.

Gary Miller:                        Glad to be here.

John Warrillow:                Tell me about Aragon Consulting. What kind of consulting did you guys do?

Gary Miller:                        We attacked a number of management consulting issues, one of those being M&A, particularly when one of our clients wanted to diversify or divest, either one of those scenarios. We helped them launch new products and services as well to have the reverse of that effect.

John Warrillow:                How big did you get this company because most consultancies that I’m aware of, especially somewhat sophisticated ones like, I think, the topic that you’re describing. They generally are a very small company, the owner and maybe one or two helpers. But I understand you got this business up to be fairly significant in terms of size.

Gary Miller:                        Well, in comparison to who we sold it to, we were a rounding error on the balance sheet, but we were national and international. We had eight offices throughout the nation. I started the company with myself and an admin assistant, and it grew from there. We had 153 employees deployed throughout the US when I sold the company.

John Warrillow:                I understand that over time you brought on partners. Maybe, talk a little bit about that. Why did you feel it was necessary to bring on partners as opposed to just employees?

Gary Miller:                        Retaining high-powered talent is always difficult for any company, regardless of its size. It was my beliefs that if I gave stock of the company to the key individuals that I needed, I would have anchor, bench strength that I think any company needs to be able to grow to the levels that we wanted to grow. So I selected partners that had specific skillsets in various industries and in subject matter expertise within those industries. It goes with the major sectors that we were targeting; telecommunications, utilities, insurance, financial services, technology, and telecommunication. Those were the big industries we served.

John Warrillow:                How did you convince, because I think a lot of owners and maybe some listeners to this show would be thinking about sharing a little bit of equity with a senior person in order to retain them and to grow with them. What are the challenges? Of course, on the other side of the table is that that being a minority shareholder in a privately-held business doesn’t always work for the minority shareholder because for those shares to be worth anything, the majority shareholder needs to decide to sell. Did you guys talk about the fact that you were planning to sell? How did you convince those partners that those shares were real and they were going to have value in the future?

Gary Miller:                        That’s a great question. There’s two things we took into consideration. One, I chose to give the stock away as opposed to selling it. As a result of that, if they chose to leave the company before we sold the company, they had to give back the stock, and we’d paid them a penny a share for the stock. Second, it was the retention, that mechanism for those people because when we had issues at our board meetings, each person had an equal vote to the other, that is, whether you owned five dollars worth of stock or 50,000 worth of stock, it didn’t matter. Each person had a single vote, including myself.

Gary Miller:                        As a result of that, their voices were on par with mine, even though I was the controlling shareholder, but at the same time each of the minority shareholders felt as if they were equal partners to me, in that case. The corollary to that is our decisions had to be unanimous, or we did not go through it. So one shareholder could hold up an entire proposition or a change in direction that we thought the five of us ought to go.

John Warrillow:                Man, how did you get anything done?

Gary Miller:                        You know what, we were pretty much together before we ever hit the formality of the boardroom. We socialized, discussed it, modified it, changed it, et cetera. The only thing that I reserved in that case was if it were something critical to the company, then I would call for a share vote. In the 18-year history of the company, I only had to do that twice.

John Warrillow:                What over? What was the decision you were trying to make?

Gary Miller:                        One was a partner who became personally involved with one of the employees, and we made the decision that he should go. The second decision revolved around a direction that we were going to go in terms of our R&D work. Three of the partners didn’t feel we had enough money to fund it. As it turned out, we did have because we closed a very large engagement, which provided us the internal capital from our working capital to go on in that direction. It was the direction of neural network incorporation in terms of our predictive modeling. As it turned out, that’s what IBM wanted when we sold the company to IBM, but since we didn’t have unanimity in that decision, I had to vote by share.

John Warrillow:                Okay. I want to get to the neural networks and IBM in a second. Before we get to it though, along the way most consultancies, the knock is they don’t sell for very much when they sell. But the best part is they’ve got fat profit margins, and they’re relatively not that capital intensive, so you can declare a lot of dividends along the way. In your case, you were growing quite quickly. Are you declaring dividends year after year? Are these shareholders making money through dividends as well? What’s that situation?

Gary Miller:                        It was checkered for us. We would go through a strategic planning process. Our CFO would provide us with a variety of spreadsheets, charts, and so forth identifying the working capital needs we thought we would have to have, given the strategic plans that we had developed. That always came first. The second thing is that we kept a reserve balance on hand of about three-quarters of a year’s operating expenses in the event that we couldn’t close business we needed to keep the doors open. Our headquarters was about 17,000 square feet in St. Louis. Then our other offices ran around 2,500 square feet throughout the US. We had eight other offices.

John Warrillow:                Three-quarters of the year of OPEX is a fairly significant chunk of change. Why keep so much on hand?

Gary Miller:                        Because we had very expensive talent. Our biggest single operating expense was general administrative. Of that, it was salaries to the subject matter experts in our firm.

John Warrillow:                Tell me more about this shared deal where you gave shares to the partners, minority shareholders, but if they left the company on their own accord, they would have to sell them back to the company for a penny.

Gary Miller:                        That’s true.

John Warrillow:                I’ve never heard of this. I’ve never heard of this, Gary, and I’m not a lawyer, so I’d love to know how do you paper a deal like that? Is that called something?

Gary Miller:                        No, it’s simply stock grants. I sold the shares for a penny a share. As a result of that, they had no income tax to pay when they received their shares or very minimal at most. Therefore, if they left the company, they had to return those shares, and we paid them a penny a share for the return. The reason we had that was simple. We weren’t trying to make money on the shares, we used it as a retention vehicle. That carrot, if you will, to say, “Look, some day these shares are going to be worth an awful lot of money.” That’s not to suggest to you that we didn’t have bonus programs, and we had very rich benefits for all of our employees, frankly, and particularly for the shareholders. So they were getting compensation through other means besides the stock only.

John Warrillow:                Why use the stock grants for a penny versus stock options? Why wasn’t it… Go ahead.

Gary Miller:                        That’s a great question. The reason is is it was far easy to administer stock grants than it was options. If the company, through valuations, and we got valuations every two to three years until the last five years. Then we wound up getting valuations every year and having them updated. But it was simply easier to administer. It costs us less administrative. We did not have to keep track of someone. If someone had 150,000 shares, it was worth 150,000 times one penny each.

Gary Miller:                        We didn’t have to worry anything about exercising. We didn’t have to worry about down rounds, up rounds. We didn’t have to worry about any of those things. Again, it was a retention tool. Since their salaries were, frankly, above normal, as you said earlier, most consultancies are a cottage industry, one, two, three, maybe, four or five people. In this case, we all knew that we would be exiting at some point in time. More likely than not, it would be a client purchasing us.

John Warrillow:                All right. Let’s get into that. So you build up this company. You’ve got 150 employees. This is a big company. In my view, this is a big consultancy. What was the trigger that made you want to sell it?

Gary Miller:                        It was at a point when we thought we’re going to face an economic downturn. We thought we were at the top of the market, and as it turned out, we were correct. IBM approached us. We had them as a client for five years. They approached us, and they wanted to learn more about our predictive modeling strategy.

John Warrillow:                For those of you who don’t know, what do you mean by predictive model in laymen’s terms?

Gary Miller:                        Yes, we invented some methodologies in which our clients could simulate new marketing or product sales strategies simultaneously with other strategies, and the neural networks would learn on demand and give a predictable outcome that was plus or minus five percent in terms of the accuracy category.

Gary Miller:                        In addition to that, it also predicted the response of the competitors. So IBM saw this saw as a great tool in their global services basis, and they wanted to know more about it. So they asked us if we would license it to them. We suggested that that probably wouldn’t be in our best interest because once you license that kind of technology, if it works, terrific. If it doesn’t work, they would cut you off and, like any other contract, they just wouldn’t renew it. And yet, they’d still have the intellectual property. That’s why we decided if you wanted us, you need to buy us as a company.

John Warrillow:                Fascinating. So this is more than… This has happened many times in interviews that I’ve done for the show. What starts out as a licensing conversation, how you can license that IP, quickly moves into an acquisition discussion. It sounds like that’s what happened in your case. Where does it go from there?

Gary Miller:                        Well, when we said no, they said, “Well, look, what if we could guarantee you x number of dollars of business? At the time they were talking about $20 million a year in revenues to us. We thought to that, and again we knew enough about the way Fortune 500s and upper middle market companies work.

Gary Miller:                        In that, that could be a short-lived contract because in any of their contracts most companies always have an out. And so we thought, we’re just better off selling them the company if they wanted, or we’ll take this technology and take it to HP or McKinsey or any number of other consulting… Bain, as an example. They knew that those were our options, so it didn’t leave them a lot of choice. They either had to buy it, or they had to build it themselves because they tried the partnering route in any number of ways, and we just said no to partnering. Either buy us, or you can go build it yourself.

John Warrillow:                IBM’s a smart company. They got a lot of people there. Why were you confident that they wouldn’t have the ability to build it themselves?

Gary Miller:                        They were behind the curve and were limited in the C-suite to only getting to the Chief Technology Officer. We, in turn, were sitting with CEOs and board chairmen. So they wanted our access at that level of the C-suite other than the CIO or someone in charge of technology in general. That was another added benefit to them. By picking us up, they picked up our relationships as well and, therefore, they provided contracts for all of us for a two-year period. That was a part of the deal. As a result of that, they paid all cash for the company.

John Warrillow:                Wow. They paid all cash for a consultancy.

Gary Miller:                        Yeah. I want to share one thing with you. I thought I would be so smart in that I wanted cash and stock, IBM stock. They made it very clear that they do not dilute their stock by providing stock as an acquisition payment. So it was either. if they bought us, it would be all cash or nothing at all. As it turned out, I was much better taking all cash because IBM stock really began to decline at that point.

John Warrillow:                That was fortuitous for you, for sure. Why did you want stock? A lot of people don’t want stock, right? There’s just taking their risk in putting it in another stock. Why were you interested in stock at the time?

Gary Miller:                        Well, we believed that IBM, on a long-term basis, would grow, number one. We were wrong about that. We went into a recession about six months after the deal closed. So the stock began to go down, and down, and down. It got down as low as $53 a share. At the time that we sold the company, the stock was $137 a share. Now, of course, I think it’s running about $121 a share. While it’s gone up to $150, $160 a share since we sold the company, it’s back down again to $120 a share. We’ve had a change in leadership at IBM, and the markets have changed significantly since we had sold the company. As a result, it turned out we were far better off with cash.

John Warrillow:                Let’s get into the actual sale itself. You’re playing hardball with IBM. You’re saying, “Look, if you want us, we’re not going to license it to you. You’ve got to buy the company.” Who made the first move? Did they come to you and make an offer for the company? Did you put a price on it? How did that worK?

Gary Miller:                        Yes. The answer is they came to us because we were one of the engagements they had contracted for was to use this simulator technology for a group of their clients. We were in the background, but in essence running that technology for them. They liked it. Their clients liked it, and that was the catalyst that they initially came up and said, “We’d like to buy you.” We got together, and I said, “Well, great. Give us a term sheet, and we’ll review it and take a look at it.”

John Warrillow:                What was the original offer multiple that they were offering in that first term sheet?

Gary Miller:                        3x EBITDA.

John Warrillow:                What was your reaction to that?

Gary Miller:                        Well, it was pretty poor from a number of reasons. One is we thought that technology had a lot more power to it and, therefore, would gain more revenue for IBM or anybody else that would use it. We didn’t think that 3x of EBITDA was adequate compensation for what we thought the long-term stretch was for the technology we’d invented. That was number one.

Gary Miller:                        Number two, they wanted to make an asset purchase. We then would have been taxed at ordinary income as opposed to a stock sale which we would have been taxed at long-term capital gains. They finally acquiesced, and the purchase was a stock purchase versus an asset purchase. The due diligence process, by the way, ran from the time we started the talks to the time we finished, including the due diligence and the purchase and sale agreement and all of the closing documents was seven months.

John Warrillow:                That’s helpful, for sure. You get this offer for three times EBITDA. You’re disappointed internally, How did you react to them? Did you throw your arms up in the air and say, “You got to be kidding me?” Were you cordial about it? I’d be curious to know the gamesmanship that you pursued in trying to get them to drive up their offer.

Gary Miller:                        Well, the first thing I did was thank them for their offer. I told them how much we appreciated their offer and the thoughtfulness that they had put into it. However, I said the problem with the offer is that we’re going to be taxed at the level that we just don’t feel we need to be taxed since we’re a C-Corp. We want to be able to offset those taxes. If you want an asset sale, then the price is going to have to go up significantly to pay for the tax liability that we are all going to have as partners of the firm.

John Warrillow:                Did you have a number? Did you have a multiple in mind, Gary, that you thought was fair?

Gary Miller:                        Yeah, I thought 8x EBITDA was fair.

John Warrillow:                Okay. So you’re way off at this point. There’s a three, you’re at eight in your mind. You said they’re were more than one point. First, you got to drive up your offer here if you want to make it an asset sale. What was your second point in your rebuttal?

Gary Miller:                        The second thing is… The way I did that was it never, ever works at least that I’ve seen if you start to get angry over things. That’s where business owners make such big mistakes is they’re so emotionally involved. In this case, we as partners treated this just like any other transaction that we would have with our clients. You’re courteous. You’re nice, but you’re firm. You support that with rational facts. It was clear to us that they did not have their acquisition team. Didn’t have the knowledge of tax structure. The risks in warranties were way out of line in what they wanted, et cetera.

Gary Miller:                        We engaged a pretty strong deal team. All of us had our independent accountants looking over our various estates. We had estate plans in place, and we had a transaction law firm that we had engaged that had done several deals with IBM. So we had to set up a Chinese wall, and IBM agreed to that. We had a different deal team from the law firm than the typical deal team that IBM used since we had a common law firm. Had they not agreed to the Chinese wall, that is, the law firm and had IBM not agreed to allow their firm to work with us, then we would have sought another transaction law firm.

John Warrillow:                The transactional law firm was important to you.

Gary Miller:                        It was because the wording of the contract to purchase you is critically important because it could be the difference between paying thousands of dollars in taxes for the IRS, and at the same time we had to make sure we minimized any legacy liabilities that could come with a stock sale.

John Warrillow:                Got it. Makes sense. Where does it go from there? In your head, you’re thinking eight, they’re thinking three. Did you propose a counter offer?

Gary Miller:                        No, I just asked them to revisit the issues and relook at the quality of the company, the bench strength of the company, our pipeline of business, and who our clients were, and see if they may have erred on the side of a low offer there.

John Warrillow:                You are the diplomat of choice, man. I think you should be negotiating world peace.

Gary Miller:                        You’re most kind. I never, ever wanted to take advantage of someone else’s uninformity or ignorance, et cetera. The deal came on the IBM side, it just wasn’t quite as sophisticated as you would think it was, but we’re a small company compared to IBM. We were then.

John Warrillow:                Do you think you had the B team?

Gary Miller:                        Oh absolutely. We were a small company. The CFO wasn’t looking over this acquisition. The IBM CFO wasn’t. We were several layers below the C-suite.

John Warrillow:                Okay. That’s helpful for sure. What next? They came back to you, presumably, seeming like negotiating with their selves here. But they came back to you with another offer. What was the next offer in terms of multiples?

Gary Miller:                        They did. They came back and said, “Okay. We’ll make a stock purchase, and we’ll give you eight and a half times EBITDA.”

John Warrillow:                So wait a minute. Gary, they go from three to eight and a half without-

Gary Miller:                        Yes.

John Warrillow:                That’s incredible.

Gary Miller:                        They did. “I really appreciate that. I need to visit with the other partners, and we’ll be back to you.” We came back to them, I guess, two or three days later, et cetera. “You know, here’s what we have in mind. Why don’t you just give us 1.5 times our annual revenue? We won’t have to worry about anything, and that will make it a stock sale, et cetera.” We wound up agreeing on 1.2. I went back with a higher price that I knew we would never get, but they had to win on this last round of negotiations since they had come up so much from their low offer.

John Warrillow:                Fascinating.

Gary Miller:                        I wanted to give them an opportunity to say, “Look, they wanted 1.5. We’ve agreed to 1.2. We’ve got a good deal here. Let’s go.” That’s the way it turned ut.

John Warrillow:                What did 1.2 equate to as a multiple of your EBITDA?

Gary Miller:                        Let’s see here, almost 11 times EBITDA.

John Warrillow:                Wow. Starting at 3, getting all the way to 11, I find that fascinating. I find it fascinating that you didn’t have to spend months with spreadsheets and projections. Literally, you went back and had them reevaluate the company.

Gary Miller:                        Well, they did, but I want to be fair to IBM in this case. I do not want to portray them as inadequate in making this deal. They went back and modeled among themselves how much revenue they could generate from our predictive modeling technology among their existing clients. Second, this was a vehicle for them to expand their touchpoints within their major companies. They would no longer be limited to the CIO. They could go to the CMO, as an example, the chief sales officer. They could go to the CFO with various scenarios here if needed capital was required. We opened up the C-suite for them to this product.

Gary Miller:                        When they begin to model out the potential revenue, that gave them space and support to jump from three to eight and a half on up to the 1.2 of revenue in that case. That’s how they did it. They did their own proforma modeling of this series of technologies that we had invented.

John Warrillow:                That’s helpful for sure. How important was the predictive modeling technology in their overall view of the value of your company?

Gary Miller:                        It gave IBM first mover advantage because there was nothing in the marketplace that used neural networks, artificial intelligence to the degree it was artificial at the time, that is, it was in its infancy at the time. Today, that same product unless IBM has updated it and continued to do so. It’s like the automobile industry today. It’s like having about a 1913 Ford compared to a 2019 Ford. That’s how fast technology has moved in that space. Now, we have augmented technology, artificial intelligence, and all types of hybrids and all of those going forward. It’s being used in a number of business spaces that it was never used before.

John Warrillow:                I guess what I’m trying to drive at is do you believe the deal would have been done had it not been for the proprietary IP that you developed? If you were just a generic consulting firm doing project-based consulting, you still had 153 employees. Do you think you could have… I mean, it’s hard to know. If you had to guess, how important was that product to IBM’s overall appetite to buy your business?

Gary Miller:                        I think it was critical. I mean, we had a research division in which many of those employees were attached to our research division versus the consulting division. But look at it this way, you have a client here that’s got technology that you want. If you don’t, how fast could we build it if we don’t buy it? I’m sure they went through that analysis, and they decided it would be far easier, cheaper, and quicker to buy it because they knew that if we would be entertaining the sale of our company to IBM, we would be entertaining the sale of it to any one of their competitors. At that time, they were really expanding their global services consulting efforts because they had far more margin in it than they did in their hardware side and/or their software side.

John Warrillow:                Let’s go through the deal process. You agreed to this almost 11 times EBITDA offer. What was due diligence like?

Gary Miller:                        Well, it was pretty straightforward. We had taken some time to prepare before… Well, let me back up. At the time they wanted to bring their IBM consultants in to learn about this technology. That’s when Dave Yost, the CFO, and myself… He’s since passed away, but he and I decided we’d better get this company in shipshape, et cetera. That was before data rooms or anything else. That’s where you set aside a war room, and you stacked all of the documents required for the due diligence process.

Gary Miller:                        We were pretty well prepared by the time we got the term sheet. We didn’t let them see anything other than our past five years of performance and our three years of projections going forward. As it turned out, our projections were lower than what they realized going forward. They beared down terrifically on the historical financials, and they remodeled and recast the balance sheets and the P&Ls in terms of where they thought the company could go as they modeled out what they could sell to global services division at that point. When you’re faced with a defensive buy, which they wanted to take us off the market so that we couldn’t sell what we had invented to one of their competitors.

John Warrillow:                Did they know that was a threat? Had you threatened as much?

Gary Miller:                        Oh no, not at all. When they looked at our client list, and they saw that we had worked with McKinsey, we’d worked with Bain. HP was a client of ours, and we were doing similar work for HP that we were for IBM. They got the message pretty quickly.

John Warrillow:                Got it. So we were talking about diligence and what was surprising or the most difficult part of diligence.

Gary Miller:                        Yeah. Well, it was the verification of our financials, and I still have this note. They sent a note to our CFO that this particular due diligence team said that they had never seen a company with cleaner financials than we had.

John Warrillow:                Wow.

Gary Miller:                        That built a great deal of trust when you’re in the negotiating room. They know that if you are speaking of something in the future and they look back and see how good you have been in the past, you’re just more creditable in that end. I think that goes a long way in negotiations. They looked at our customer base significantly. After looking at our governance documents, our financial documents, and our technology, this was the order that they took a look.

Gary Miller:                        Then they took a look at our customer base. We didn’t have anything under a Fortune 500 company. We had some privately held companies that were a little less than that but well headed to falling into that Fortune 500 group. Then we were serving the Global 200, and they saw that as a major mark. But they confirmed our reputation with our current clients as another part of that due diligence.

Gary Miller:                        In fact, it was a difficult time for us to give up the names of our contacts because that meant that we were disclosing we were selling our company. Our fear was we would lose the clients we had if our clients knew that we were going to sell the company. The way we worked that out is that IBM assured our clients that we were a part of the transaction. They were not planning to come in and replace us. And they did not, by the way, replace us. They looked at litigation, by the way, past, present, and future. It was good that we didn’t have any in our 18-year history, but they looked hard to see since they were going to make a stock purchase, they wanted to make sure they weren’t going to pick up some legacy liability in future litigation.

John Warrillow:                I’ll just speak directly to my listeners, Gary, for a second. That is, one of the key distinctions between a stock and an asset sale. Most acquirers will want to buy your assets because they won’t inherit your obligations, legal obligations, whereas you will probably want to sell your stock because in most tax jurisdictions favorable tax treatment and also the buyer then inherits, essentially, whatever liabilities your company has, loss in the closet, et cetera.

Gary Miller:                        Today that’s not as much of an issue as it used to be because you can insure around legacy liabilities. If someone demands a stock purchase versus an asset purchase, then typically the buyer will come back and say, “Okay, we’ll split the cost of the premium with you to ensure a round potential liabilities down range.”

John Warrillow:                The insurance premiums.

Gary Miller:                        Yeah. Of course, that wasn’t possible then because there were no insurers ensuring against future liabilities.

John Warrillow:                Gary, I’m curious to know, obviously, your co-founders and stockholders were involved in this process. How did you reveal to the rank and file employees, this 153 employee workforce, that you had sold the company?

Gary Miller:                        That’s a great question. I think telling the employees, it is the timing of that is critical so you don’t lose good people. They may not be your strongest people, but they’re good people. We chose, once we got the term sheet, we chose to call an employee meeting and tell those folks that we are selling the company, hopefully, if we get through the due diligence process and the negotiations on the purchase and sale agreement. We are selling the company; however, part of the terms of that agreement is all of you are guaranteed jobs when we close the sale. That guarantee will continue for a six-month period for everyone, and for some of our employees it will be longer.

John Warrillow:                What was the reaction?

Gary Miller:                        When they found out who it was, which the first time we met with them, we told them it was IBM. They were ecstatic. They thought it was a real coup that they’d be working for IBM.

John Warrillow:                Because IBM, obviously, has a great reputation, blue chip company. Yeah. Got it.

Gary Miller:                        We increased the salaries of all of our employees as part of that negotiation. They took our defined contribution plan inside and awarded some other options for some of the staff. IBM wanted to keep the staff as much as we wanted them not to be fired. I think most good acquirers today, while they look at the synergies that they can attach themselves to to bring down the cost of the acquisition. Today’s world’s changing to the extent that a good acquirer wants to keep the best and the brightest of the employees there.

John Warrillow:                Absolutely, for sure. Gary, I’d be curious on a personal level. I mean, you, obviously, were the majority shareholder in this company. From what you’ve described, you made a lot of money personally from the sale. How did that money affect you personally? Did you buy yourself a trophy? Did you do anything to sort of mark the sale?

Gary Miller:                        We owned a vacation home in Vail, Colorado. That was our second home. We were living in St. Louis at the time. Our decision was that we would take a portion of that money and remodel that home, that is, enlarging it because our children were all getting married, and that meant more children and grandchildren. We wanted to have enough room for the entire family to celebrate Christmas and New Years with us. So we took a portion of the money and remodeled the home, updated it, and expanded our vacation home. Then eventually moved there as our permanent home. That’s the only… The rest went into savings and investments, and so forth. I guess I would tell you I think that’s the case with the other five partners as well. No one want out on a spending binge or anything like that. We were just Midwestern people, pretty conservative in our nature, and it was a glorious event.

John Warrillow:                I bet. Gary, I appreciate you sharing the story with us. I know that we’re going to have people wanting to follow up with you. What’s the best way for people to reach out to you? Are you on LinkedIn, or can you send people to a website? What’s the best way for people to reach out?

Gary Miller:                        Sure. Well, they can come to our website. The website is

John Warrillow:                Gemstrategymanagement.

Gary Miller:                        Yeah., or you can email me at

John Warrillow:       is the website. Gary Miller, thank you so much for joining us.

Gary Miller:                        It’s my pleasure, John.


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