One of the smartest investment bankers we know
That would be Fred Newcomb, Sr. – Jr. is real good, too – of Newcomb and Co. Fred gets this honor (no cash, just honor) from the way we watched him handle an investment banking investment on which we worked.
Fred was looking at a tech-based company, and thought it had merit. It was small, and had a narrow niche. The due diligence on the company, and its principals, turned up $35,000 in unpaid bills, and two secretaries who some of the engineers had tried, unsuccessfully, to coerce into their beds.
Fred paid off the debt and the miffed secretaries, and cleaned up the company managerially. He also tightened up the ties to, and protection of, the intellectual property. He then asked us to work with the company’s engineers to develop a list of all of the competitors, and rank the competitors according to quality of competing technology, as well as the quality of the engineers behind the competing technology.
Of the 14 companies we found, 11 were of interest either because they had reasonably good technology or they had good engineers. The three remaining companies had neither good engineers nor sufficient funding. These were ignored.
We than drew up a list of the “gold collar” workers (a “gold collar” being that worker who is so important to the company that if they were to leave the company would fold) in each of the 11 companies, and a decision was made either to buy out their company, or to hire the engineers away from the competition. Four of the other companies were acquired, and the “gold collar” workers were recruited away from the remaining competitors.
Thus, when the company was finally funded, Fred had to fund the company at about twice the level initial requested, but there was no effective competition left. The small tech company developed well, is very profitable, and to this day has a virtual monopoly on the technology.
The moral of this story is that if you are smart and adequately funded, you can find problems in an acquisition and deal with them. Part of an acquisition such as this should be competitive intelligence, allowing a strategic decision was made to acquire good companies, hire the good engineers, and capture all of the narrow niche technology under one roof.