This Little Piggy (10) For a moment, Nachman feigned terror, then calmly placed four sevens on the table. “Goddamn it! How the fuck do you do it every time?” The Beard threw up his cards. “Relax. It’s only money,” laughed Nachman. “Isel, you’ve got plenty of it. Anyway, I’ve got to break for a business meeting. Let’s reconvene in a couple of hours.” Nachman was maybe five-foot-eight with a rounded, slightly obese belly and short upper torso topped with a tiny, bald peanut shaped head. His gravelly, raspy tone was refined, almost gentle. He was the proponent of the thirty-second smell test. If your shit didn’t stink in that time, you got his attention. Otherwise you were history. “Girls, time to go,” he ordered. “Rita, you look tired. Why don’t you take a nap in our bedroom.” In a moment, the big room belonged to the four businessmen. Bob and Michael had passed the smell test. “Come on, gentlemen. Eat,” urged Nachman pointing at a giant tray of peppered lox and cream cheese and mini-bagels. “We can’t do business on an empty stomach.” With a common passion for poker and competition, Nachman and Bob bonded instantly. When Bob crowed about whipping Bjorn Borg’s ass in Monte Carlo, Nachman countered with out-bluffing Leroy Neiman at Cannes. Each took a turn trying to outdo the other. Then they started on their houses. Bob’s hand included the Kings Point Mansion, a twelve-room townhouse in London’s tony Knightsbridge, and the Sutton Place Penthouse in New York. Nachman’s hand was stacked with a palatial Bel Air estate high in the Hollywood Hills towering over the puny mansions of Eddie Murphy and Hubert Humperdink, plus an 8,000 square foot vacation cottage with pool and tennis court on the grounds of the prestigious La Costa Resort and Spa in Carlsbad, California. His kicker was a flawlessly restored Spanish adobe in Santa Monica looking out over the ocean. The finale was all business with Bob taking the lead. “The first ten million was cheap, public seed capital. This round of acquisitions should easily justify another fifty million dollar raise. The acquired companies wind up with some mix of cash and stock, plus earn-outs. If we achieve just normal growth and modest P/E multiple of fifteen, everybody’s stock will be worth thirty to forty times its original value. This is the Jimmy Dean deal all over again.” “You mean the country and western singer who makes sausage?” asked Nachman, totally perplexed by the analogy. “That’s him. When Dean sold his company to Consolidated Foods ten years ago, he got a million in cash and ten million in stock for a company doing about thirty million in sales. Consolidated became The Sara Lee Corporation. They started acquiring companies left and right, splitting the stock eight times in the process. ‘Big Bad John’s’ stock is worth over four hundred million today.” “You’re not trying to bullshit me, are you?” The gravelly voice turned caustic. “Trust me, I’ve done this before. With the right acquisitions, this is a piece of cake.” “Okay, okay. If we decide to pursue this matter, what are the next steps?” “We need to review your financials,” said Bob. “If everything is clean and you can show a substantial three-year earnings history, we’ll make you an offer.” “That’s easy.” Nachman turned to Julie. “Make sure Marty Edleberg gets Bob a set of the latest numbers. Bob, when you’re satisfied, let’s meet at my beach house and talk deal specifics. If you have questions, just ask Marty. He knows everything. He’s family.” Bob wanted to keep talking. Nachman didn’t. “Rita, honey, tell the boys to come on back so we can finish our tournament.” Dawn was breaking. * JULIE AND NACHMAN shared breakfast the next morning in Nachman’s suite. “What do you think?” Nachman got to the point. “Bob’s a character, but I think we can work with him,” said Julie. “Plus, I have a feeling that corporate guy Michael, who sat there with his mouth shut, will actually run the thing. His rep is pretty first class.” “You and Marty handle it,” ordered Nachman. “But let’s be real clear. I want cash for the company. Period. I don’t give a shit about the ITI stock or Jimmy Dean. That’s like playing poker with ‘deuces wild.’ I learned a long time ago...all that matters in this world is how much cash you have. With it you control the situation. Without it...” “You don’t have to convince me,” Julie raised his coffee cup. “Tell Marty to make sure Bob understands existing inventories are my personal asset, not the company’s. Between the company and inventory I want to net no less than thirty million bucks.” Nachman spread cream cheese on his mini-bagel and ate it in two bites. “That’s the money side,” he continued with his mouth full. “There are two other items. Get me off my personal guarantees for our bank credit line. If they need a little time, like twelve months post financing to get their shit together, fine. But no more than that.” “Got it,” said Julie like he was taking a deli order. “We’ve also got to protect the Nachman name. If ITI goes belly-up, the Nachman name reverts to the Nachman family. There’s got to be some way of putting that in the contract.” * THE DAY BEFORE BOB returned from Vegas, Astrid had opened the envelope marked ‘private and confidential’ and made a copy for her burgeoning little file. When her boss arrived, the financials were waiting on his desk. Bob devoured the tasty documents. Not only did the reports meet all generally accepted public accounting standards, but the three-year earning history was much higher than he anticipated. As Irwin Friedway was so fond of saying, “I don’t deal in chopped liver, only caviar. Otherwise why would I have gone to Harvard Business School?” Bob commandeered Michael to discuss Nachman over lunch at The Four Seasons where the Mâitre d’ offered each of them a VIP customer house account. Michael thought he had died and gone to heaven! As excited as Bob was, Michael didn’t quite yet grasp the marketplace impact of the acquisition. Returning from lunch, Bob closed his office door and spent the afternoon promoting the Nachman deal. First up was Bernie Dyckman... “I can’t give you a lot of details, but as a major stockholder, I thought you’d like to know we are close to the acquisition of an important West Coast liquidator.” It was like dropping blooded bait in the water. Bernie Dyckman made two phone calls in the next eight minutes: one to the Hassidics who identified the acquisition candidate as Sam Nachman and one to Jack Berger to place an order for another million shares. Bob next called Marino... “No long-winded shit, just to the point,” snarled Marino. “I’m right in the middle of the fuckin’ trading day.” Bob leaned forward, accidentally hitting the speakerphone button. “What if I told you we were to close to a major acquisition, a company with a historically solid earnings stream?” Bob dangled his loaded hook. “You want to hype the situation? Then put some fuckin’ meat in the sandwich.” Michael on the way to the water cooler couldn’t help but overhear Marino screaming on the speaker phone. “How about thirty-five million in revenues and three million in after tax profits,” declared Bob. “Where are you going to get numbers like that?” “The Sam Nachman Company.” “The LA liquidator? How the fuck are you going to finance that?” “Like I’ve done before, consolidated ‘subject-to’ deals.” “That’s sophisticated shit.” “The payoff is huge. But you’ve got to hold up your part of the bargain.” “We are.” “Bullshit,” snapped Bob. “The stock price has got to climb. I’ve got to be able to close these deals with paper. That will make it easier to play with good-will allocations.” “Easy, easy! Don’t blow a fucking’ blood vessel over the phone.” “Then get the goddamn stock rolling. Capiche?” “Capiche.” It was decision time for Michael. Keep walking or confront Bob about his questionable promotional tactics. His first instinct? Diplomacy. “Bob, I couldn’t help but hear Marino screaming over the speakerphone. Does that make sense?” Not knowing exactly what Michael heard, Bob tried the dumb routine. “Michael what are you talking about. I was briefing our underwriter. They need to be kept abreast. That’s part of my job as CEO.” “Bob, with all due respect.” “Cut that Madison Avenue bullshit,” scolded Bob with the proper hint of intimidation. “What’s you’re point?” Michael had seen this movie before. He knew if he folded, he have to forever hold his piece. His tone changed. He glared right back. “Like I told you in the beginning, Bob, I’m just a street kid from the South Bronx. Intimidation doesn’t work. You gave me that hypocritical speech about quiet period and business ethics, then you’re spilling your guts to a thug financier.” Bob attempted to deflect the issue. “What do you mean, thug? Dominick is a legitimate investment banker.” “For Christ sakes, Bob, cut the horseshit. I grew up around the Mafia. I know thugs! Those Norwest characters remind me of my cousin Anthony and his collection company goons.” Bob was cornered. He had no place to go, but the truth. “Michael. We’re partners right? So let’s call a spade a spade. Norwest is not exactly Goldman Sachs. Do you think I enjoy dealing with scumbags like Marino and Berger. They couldn’t shine our shoes. But, we’ve got to be practical. We need them to get through the first door. And, there’re so fucking dumb, we’ve got to hold their hand every step of the way. Understand.” Michael smiled. “Capiche.” Bob nodded back. Their partnership had reached a new level of understanding! * “HOW’S DADDY’S LITTLE GIRL?” said the cheery voice. “Daddy. It so nice to hear your voice,” said Sandra. “How is everything in Tampa? What the weather like at this time of year. How’s Mom.” “Mommy loves the place. I mean what’s not to like. 75 degrees and sunny in the middle of the winter. We’re glad we sold Larchmont, and moved south while we’re still young enough to enjoy all the outdoor activities. How’s by you and Michael and my grandsons?” “All’s well. In fact Michael just changed jobs.” “Changed jobs. I thought he was doing so well at A&J?” “He was. But this new opportunity came along to run a company. He’s pretty excited. And, as I understand it, there is a chance for us to be financially independent in a few years.” “What about you, baby?” “Whatever’s fine with Michael is fine with me.” “You don’t sound that thrilled. It may be the GE Serviceman in me, but how do you become financially independent in a few years.” “Daddy, it’s a long story. And, I’m not sure I know all the details. But Michael met a wealthy entrepreneur with a successful track record through a mutual friend. The man is starting a new company, and felt some of Michael’s skills would be a perfect fit. Michael got a huge salary increase, s sign-up bonus and lots of shares in the new company.” “What does the company make?” “Daddy, actually I’m not quite sure. Something about buying and selling companies. They plan to build a huge company. They even raised ten million dollars in the stock market. Michael’s got this huge office in a beautiful new building. His boss, Bob, is a fascinating fellow. A real man about town. I think he’s part of the New York social scene.” “God bless you kids. You’re way beyond my league. I guess I’ll read about you in the Wall Street Journal.” “And, how’s the nursing going?” “Until recently, pretty well.” “What does that mean?” “Our hospital got bought out by New York Hospital. Everybody’s a little concerned about their job.” “Baby, not to worry, God always has a way of making things work out. Good people always get their just due.” “Love you, Daddy, talk to you again soon.” * BOB AND MICHAEL VISITED Nachman at his beach home in Santa Monica to make an offer. A maid in a starched white outfit answered the door and led them past carved granite trickling fountains, bronze sculptures and then down a long gallery style hall with diffused light flooding a wall of original works of art, each more magnificent than the last. Moments later they were standing in a sumptuous dining room with a patio on the ocean. The table was filled with platters including three kinds of caviar; five types of smoked fish, beef, tuna and salmon capriccio, enough for a small wedding reception. Bob stared out at the ocean. Less than half a mile away two years ago, he had walked out on his life and disappeared into the darkness. Had he finally come back into the light? That would depend on Nachman. “Gentlemen,” he greeted them with handshakes. “Let’s do some business.” Between mouthfuls of fish, the meeting went down like a deal already done. Nachman explained how he had been broke until he turned fifty as a merchandising manager for the old Whitefront Store Chain. Desperate for some extra commissions, he got the idea to do a clearance sale on an epic scale. “It was far more successful than anybody imagined, including me!” Nachman admitted. “We got rid of old inventory for almost fifty cents on the dollar with progressive pricing and massive ad budgets. When the WT Grant bankruptcy came along, I just applied what I had learned. It wasn’t rocket science.” Nachman paused to scoop up some caviar and put it on a mini-bagel. “You should have seen the faces on my competitors in bankruptcy court when I placed our bid. They thought I was crazy. I think that’s when somebody first called me ‘the ultimate poker player.’” “Fascinating,” said Bob and he meant it. “I gather you’ve looked at the numbers, talked to the boys,” said Nachman. “Hopefully, they told you whatever you wanted to know.” “They were all great,” Bob replied. “I understand exactly where your business stands.” “I like you,” said Nachman, patting Bob on the shoulder. “And I’d like to do a deal with you so I’m going to tell you what I think is fair. But I’m not going to negotiate. Understand?” Bob has been well prepared by Julie and Irwin; there were no surprises--$30 million in cash, ownership of the $40 million in existing inventories, a personally guaranteed credit line for twelve months, and return of the Nachman name in case of bankruptcy. “Your terms are fine,” said Bob who knew dickering would be fruitless. “But I need a favor. I need you on the credit line for a couple of years. We simply need an operating history for the Banks to provide ITI the significant lines of credit it needs to grow. You know the business far better than me. If a deal comes along and we don’t have the cash, or the line available, we’re dead.” There was a moment of silence as Nachman leaned back in chair to study his hand. Could he have all the aces? “Okay,” he agreed. “I’ll secure the line for two years.” “Thank you,” said Bob. “And we’ll throw in one million shares of ITI stock.” “That’s actually very generous of you,” said Nachman, having one last bite of salmon. Bob knew it was all bullshit. How would it look to The Street if a major acquisition didn’t include stock? “There are a few things your group will need to prepare with regard to the financials,” said Bob, looking to wrap things up. “Talk to my chief financial guy, Hyro. Julie will make sure he follows through.” “I also wanted to talk a bit about salaries and earn-outs.” “Talk to Marty,” insisted Nachman. “Whatever is fine with Marty is fine with me.” Michael hadn’t said a word and wouldn’t now. “Marty, this is Sam,” said Nachman on the phone. “We’re here at the house. The major terms are agreed. I told Robert to finalize the details with you.” Compared to Sam, Michael realized, George Bush Junior was a detail conscious nerd. * “KEEP YOUR MOUTH SHUT and just listen,” Bob ordered Michael before the Nachman contract discussion with Edleberg. “I’ll handle the negotiations. We’re going to get them to split the sale of the inventory with ITI. I’m not that stupid.” Was Michael? He didn’t understand. “Didn’t we shake hands on a specific deal already?” “To paraphrase old Willie Shakespeare,” said Bob. “’All the world’s a negotiation. Everybody in it either a negotiator or a negotiatee.’ Nobody actually means what they say. Everybody knows everybody lies. In the end, it’s just a matter of what’s fair.” Michael still didn’t get it, but he would. Pretty damn quick. At $500 per billable hour, Delano Mondrain Hudson was one of Park Avenue’s most prestigious law firms. Its office lobby looked and felt like one of those stuffy London clubs catering to rich, titled old men—stuffy winged back chairs, dark wood paneled walls, and a deep green carpet touched off with Audubon lithographs and antique English hunting scene prints in gilded mahogany frames. Michael felt totally out of place. This was definitely not the trendy ad scene. Marty’s matronly but pleasant assistant introduced herself and escorted them down a long hall past a series of offices overlooking Park Avenue. Every member of the plush club checked them out as they walked by. “Don’t take the staring personally,” Bob whispered to Michael. “Partners at big law firms are like pickpockets, always ready to steal a prospective client or force their way into a deal that’s on the table. Permits them to stake a claim for new fee income.” Marty’s corner office was the size of the Yankee Stadium infield. Marty sat behind an oval shaped desk. White shirt with the collar open, salt and pepper curly black hair, charming, and athletic, he looked like a diehard competitor even talking on the phone. “Gentleman, good to meet you, I’m Marty” he said, hanging up and taking over. “Sam has spoken kindly about you, which isn’t something he does often.” Marty wasn’t alone. On the green leather couch nearby sat a bombshell blonde with long curly blond hair wrapped tight in a black dress. “This is Christine Polack,” Marty made the intro. “One of the best paralegals in the Firm.” “Martin, we are delighted to have a deal with Sam,” began Bob who couldn’t take his eyes off Christine as he began to negotiate. “But Sam is also fortunate. How many companies would actually find the Nachman Company an attractive fit with their business strategy? And…give him the kind of earning multiple we’ve agreed to?” Marty smiled. He could see a slow curveball floating up to the plate. “Bob, let’s get off on the right foot, eh? The name is Marty. Martin sounds like some arrogant medieval prince.” Michael’s mind wandered to that asshole Martin Diamond. Bob stayed focused. “We want Sam and the family to be happy with the deal. But there also needs to be some spirit of fairness,” said Bob, his eyes on Christine’s twin mounds and working down her strike zone. “The fact that Sam will only leave the credit line in place for two years is difficult to swallow. What the company really needs is a four-year string. We all know how important availability of capital is to snatch those lucrative opportunistic deals.” Marty leaned back in his big leather and chrome chair and smiled at Christine and then at Bob. Michael had yet to say a word. “I’m well aware Sam feels strongly about the credit line issue,” Bob continued his pitch. “So I’d like to propose a compromise solution.” “Which is?” asked Edleberg. “Why not leave half the inventories in the company, like a cash reserve? If we need more credit than we have available for a given deal, we’d collateralize some of the inventory. At the end of four years, ownership of the inventory reverts to Nachman.” “And suppose the inventory has materially depreciated?” said Edleberg. “Well, that’s one of the risks of the deal. We’ll all just make our best efforts to make sure that doesn’t happen.” “I’ve been in this business for over twenty years and I can say with total confidence there is nobody like Sam Nachman,” declared Marty, coming forward to put his hands on his desk. “He will bring significant revenue to ITI as well as other valuable partners, to make your next financing a reality.” “I’m not asking for a new deal,” Bob tried his change of pace delivery. “I’m just asking you to consider...” Edleberg swung away and connected. “Listen, against my advice, Sam extended the personally guaranteed line to two years. So let’s cut this creeping incrementalism crap. You need Nachman. You need his good name, and you need his earnings. Nachman doesn’t need you. Either take the deal as is or let’s just part friends.” “But...,” started Bob. Edleberg’s stare shut him up. The inning was over. “I’ll have to confer with my advisors,” concluded Bob, but it was a wasted pitch.
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Copyright © 2004 Matt Crisci |