Tony Pompliano | Crain's Raleigh Durham

In this ongoing series, we ask executives, entrepreneurs and business leaders about mistakes that have shaped their business philosophy.

Tony Pompliano

Background:  

Raleigh, North Carolina-based ANEXIO is an infrastructure as a service company that offers large-scale solutions designed for customers migrating from legacy IT environments to a hybrid cloud infrastructure.

The Mistake:

Not keeping in mind a seller's circumstances.

The mistake was early in my CEO career in 2000. I had spent 20-plus years at a combination of Fortune 50 companies. I had a lot of executive experience, but serving in senior leadership and executive roles is just not the same thing as being CEO of a startup. Not by any means.

We were at a time when we were beginning to evaluate acquisitions. The company we were targeting was a business that a woman inherited because, unfortunately, her husband passed away unexpectedly. She knew the business, but she wasn’t prepared to run it.

Everybody who is selling a company is doing so for a reason.

She had three main problems. She had a couple key employees who were holding her up. They only had three meaningful clients, all of which were big banks. And they all owed more than 90 days of accounts receivable, so she was in a cash crunch. She had a partnership with a Russian development firm for revenue sharing on software.

She was left in a very difficult situation – both with the passing of her husband and with the situation she found herself in. I became emotionally invested. I began to want to show her that we would be a good steward of her husband’s legacy. I ended up negotiating two key employees into an employed agreement. It got the companies that owed her over $1 million to be current. I negotiated with the Russian firm, which had much more favorable outcomes than she would have gotten on her own.

We had a letter of intent so I assumed the deal was done.

She didn’t close. I solved all of her problems so she was no longer motivated to sell the company. She had $1 million more than before I started to negotiate for her. She had employees who were locked into an agreement that would provide her some level of certainty. And the Russian programming firm was in line with what she wanted.

I got embarrassed by showing up to a closing that never happened.

The Lesson:

The unfortunate part is I would have done those things to help her anyway, but I had set expectations to my board of directors that this acquisition was going to close.

I got embarrassed by showing up to a closing that never happened.

There’s a balance that has to be struck. You don’t need to resolve all people’s problems.

I’ve done a number of business transactions over the past 15 years and I always make sure that whatever is motivating them to sell, that I don’t solve that specific problem before closing.

Anexio is on Twitter at @anexioIT.

Photo courtesy of ANEXIO.