Private Equity Story Time: Beer and Tacos
Story #2 in my new series, Private Equity Story Time.
I worked with some of the top private equity practitioners as a BigLaw lawyer. They were the best around. Watching them work was beautiful.
Here is the second short story in my new installment: Private Equity Story Time. These stories are designed to pass along the lessons I learned from some of the best PE practitioners in the world.
A few years ago, I represented a private equity group under LOI for a founder-owned manufacturing business in the Midwest.
I knew this was a critical piece of a larger acquisition strategy by the PE group. The negotiations got bogged down in minutia and everyone was losing patience with each other. The deal was death spiraling.
The next day I got an email from the seller's lawyer saying, everything is resolved. Closing date is set. At the bottom of the email was a list of the resolved issues.
I was shocked.
I called my client and said, what happened?
He said, well, yesterday, I went to the office of my boss (a Partner at a top-10 PE firm and IC member) about this deal. I told him that we need to come down hard on the seller. His asks are way off-market and unreasonable. I suggested an all-hands/lawyers call to express that it was sh*t-or-get-off-the-pot-time.
My client continued, as I sat in the Partner's office he had his secretary book him on a flight for that afternoon to the Midwest and a driver at the airport. He requested that his secretary connect with Seller's secretary.
Then, when he landed at the airport, he picked up a 6-pack of Seller's favorite beer (Sam Adams) and tacos. The Partner showed up at the Seller's factory, unannounced, with beer and tacos.
The PE Partner and the Seller spent 3 hours drinking beer, eating tacos, and talking about sports, family, and their mutual love for antique cars. In the process, they resolved all the open issues.
The deal closed the following week and 2 years later the PE firm took the company public for a massive return on their investment. I sat at my computer and watched the company ring the bell for the IPO.
Very few people knew that this IPO would not have happened without beer and tacos in a nondescript Midwest factory.
