Stu Johnson, who put together several deals in quick succession to build his dream company, is an expert on approaching equity partners, and provides Rickertsen with several hard-won insights into this phase of the process. Rickertsen recommends that managers ask themselves continuously what they hope to gain for themselves and their team. Inc. Rickertsen stresses the importance of due diligence. A willing seller, flawless strategy, an excellent management team and available capital will amount to nothing if a manager fails to unearth and address skeletons in the corporate closet. Early detection of any past inconsistencies or indiscretions means that managers have the chance to be the bearers of bad news, alerting buyout partners to the problem before those partners inevitably find it through their own diligence process.
Due diligence is especially important when an outside company is being purchased.
Failure to do more than simply scratch the surface of a company and its managers can have disastrous consequences, as was the case with a deal Rickertsen worked on early in his career. The story of this buyout is told in the book as a cautionary tale for buyout managers. There is no corporate parent to blame if things go wrong, but also no one to hold the team back from achieving what they know they can. While managers may be happy running their own thriving, independent companies for many years to come, an exit plan must be crafted for investors. Rickertsen details the advantages and disadvantages of four possible exit strategies and gives particular attention to IPOs.