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Exodus Capital’s Jerry Kelsheimer

Find your purpose and you'll find the right deal

February 23, 2018

By: Mark Scott

When you have a sense of purpose to achieve a particular outcome, the odds are much better you’ll be successful.

That’s one of the key tenets of Jerry L. Kelsheimer’s philosophy on dealmaking. Through his work at the former Bank One, Comerica Bank, Huntington Bank and most recently Fifth Third Bank, Kelsheimer has assisted countless businesses on the financial components of developing a strong M&A strategy.

“The phone rings and I’m told there may be an opportunity to buy my most significant competitor,” Kelsheimer says, who recently established his own firm, Exodus Capital Partners in Westlake. “I’m going to get to a better outcome if I’ve thought about what I need to do, what I can do and what I will do in reaction to that circumstance or that opportunity.”

Smart Business Dealmakers spoke with Kelsheimer about his approach to making your business attractive to buyers and the value of viewing your company from the perspective of a shareholder. What follows is a transcript of the above video, edited for readability.

 

Are you ready when the phone rings?

The idea of being opportunistic and being prepared to execute when opportunity presents itself to me kind of frames up no different than anything else in business, or life for that matter. If I’m thinking about how I get the best outcomes as a businessperson, would I rather be accidental? Or would I rather be purposeful and intentional? To get to a certain outcome, would I rather be reactionary or would I prefer to be proactive and have a plan?

I think about how I would act or what I would do if the phone rings and I’m approached with an offer. The phone rings and I’m told there may be an opportunity to buy my most significant competitor. I’m going to get to a better outcome if I’ve thought about what I need to do, what I can do and what I will do in reaction to that circumstance or that opportunity.

Would you buy your business?

I’ve used this analogy with midsized businesses and privately owned or manager-owned companies. How do I position myself for a buyer? We can read the books, we can hire the consultants or I can help people with this. What are the 10 things we need to do to get ready for a sale? But one way to simplify it is to simply start to view your company as a shareholder.

So many companies, and there is nothing wrong with this — I use the term or analogy that they are lifestyle businesses. Nothing bad about that. It pays the bills. I’ve got my Cavs tickets over here and I’ve got the car lease payments made and I make a good living and I take care of certain family members who are in the business and specific employees. This business has treated me very well over time. I don’t always worry or think about certain things and the sense of detail or how somebody on the outside might view that business. Nor do I really need to.

Now it’s time to sell and I need a cleaner, clearer picture of what the potential of this business is. What type of financial return can it ultimately generate for the buyer? One way to process that view or how that transition might be is if I just look at today and every month of my business as if I’m the shareholder, not the owner. Suddenly, things like transparency and the quality of information now become more important to me. Understanding what a business’s strategy is and the underlying processes and operating rhythms that ensure that we get outcomes and are driving financial trajectory are now more clear to me. The actual financial performance and trajectory of the business becomes more relevant if I sit on the other side of the table and view my business as a shareholder versus the source of my lifestyle.

Be ready to make a deal

You need to approach — as it relates to being prepared and the thoughtfulness you put into a transaction — you need to approach it as the biggest sale you’ll ever make. The same thing could apply, and we use a similar analogy when someone is buying a company. I want to be selected on the most attractive terms as the buyer. That’s the biggest sale I may make in the history of my company. Do we walk into a meeting with our largest customer or the most significant prospect relative to the potential to transform our business unprepared? No. We’ve thought about it, we’ve planned, we’ve thought about what’s important to both parties and either side of the table. We’ve thought about the points we can give on and the points we can’t budge on — the things that are sacred to us.

We’ve thought about potential objections and obstacles. We’ve thought about how we’ll execute. We’ve thought about the value that will be exchanged. I’ve seen people walk in in an opportunistic way to discussions about selling their companies that are far less prepared for the conversation than they would be if they were walking into a meeting with their most significant customer.