As a new statistic in an unwound merger, Robert Cohen has learned more about business partnerships, and about himself.
“Now I know that I’m a great crisis manager, so long as the crisis I’m trying to manage is someone else’s,” he laughs.
In 1993, Cohen formed Centrus Group Inc., a turnaround and crisis management company, and in 1996 relocated from Cleveland to Akron when revenues reached $1 million. To broaden coverage, he merged with a firm of his own kind, Philadelphia-based Nachman-Hayes & Associates, in January 1999.
“They were sole practitioners for a decade before they merged their two businesses five years ago,” Cohen says. “When we merged, both of us were doing about $2 million in revenues. For a service business, that’s a lot of revenue.”
In 1999, the combined firms ranked among the country’s top 12 turnaround management firms by Turnarounds and Workouts. But when Dec. 15 rolled around, there were second thoughts about solidifying the partnership.
“We all sat down and said, ‘What do you think?’” says Cohen. “They said, ‘Well, we need to talk.’ And I said, ‘You know what, let’s just end it.’”
The decision to unwind was reached quickly and amicably, Cohen says, because when the partners set their terms on paper, they included a clause to unwind after a year if they so desired.
“The fact that we put it in the original engagement shows we had doubts from the beginning,” he says. “It wasn’t that anyone was good or bad, it was just that some of the parts didn’t equal three.”
Sharing his experience, Cohen cautions that service businesses considering such a partnership must consider several things.
1. One plus one must equal more than two. A decision to merge should be based on assets or services one company has that the other doesn’t, that, when combined, will enhance the merged firms. Cohen merged believing Nachman-Hays’ national reputation, bank contacts and advertising strength would bolster his business.
“I thought the combination of all our contacts and relationships would actually equal three, where we could share leads and work together with banks in that part of the country with investments here, and vice versa,” he says. “What I learned was that, in this line of work and in the middle market we serve, local folks like to deal with local businesses.”
2. Be prepared to lose your identity. Cohen says that before the merger, his firm was well known. That changed after the merge.
“When our name changed from Centrus Group to Nachman-Hays-Centrus, it was as if we disappeared for a year because we flew under their banner,” he says.
Now Cohen is struggling to rebuild his identity.
“It’s humbling, because when you unmerge, people think, ‘Gosh, maybe he’s not as good as he used to be.”
3. Get ready to work harder. Some entrepreneurs think they don’t have to work as hard after a merger, now that there’s someone else to rely on.
Cohen says, “You have to work at least as hard, if not harder, because you each brought value to the partnership, and if one of you decides to back off, the value goes away.”
4. Learn to partner in decision making. Sole practitioners are used to making their own choices, but after a merge, decisions must be shared.
“That takes more time and more effort, and it’s sometimes very frustrating,” says Cohen. “The good news is that maybe they will help think through decisions more thoroughly.”
And make sure you can trust your partners with the checkbook, he says.
“If you can’t do that, then you shouldn’t merge.”
5. Be prepared for the “oops.” Conserve your cash in case a partner has an accident or becomes ill.
“What would you do if they did?” Cohen asks. “You don’t say, ‘OK, you’re out for a month, you don’t get income.’ You must set money aside so that if one of your partners has an ‘oops,’ you’re prepared for it.”
6. When you’re not sure what to say, tell it like it is.
“The truth is always a good defense to frustration,” says Cohen. “If things aren’t going well, don’t hold back the truth. If you don’t want to deal with it, then you shouldn’t be in it.”
How to reach: Centrus Group Inc., (330) 864-5800
