50% Stake Sale

It’s finally happening. My mother has decided for good that I’m unable to manage all of myself, and hence I should divest 50% in myself. “The better half”, she says. She has been utterly disgusted due to my utter failure, and lack of effort, in conducting this divestiture by myself, and has now decided to take matters into her own hands.

Her second sister, along with her husband, has been appointed the lead investment banker for this deal. My mother’s eldest sister is going to be the chief scout in order to scout for possible counterparties to the deal. It is preferred, and desirable, that there be a single buyer for this entire 50%, and the current understanding is that if we are not able to tie up any good single investor, we will rather postpone the sale rather than going in for an IPO and selling the stake in bits and pieces to retail investors.

Thinking about it, I wonder if it is technically correct to call this a stake sale, since I don’t plan to take any dowry. Maybe if you take all costs into consideration, and not just the monetary ones, and if you assume payment to be a continuous thing rather than like a lumpsum (theseย  investment bankers, they can arrange just about anything), it won’t be inaccurate to call this process a stake sale.

Usually, in these circumstances, most of the work is done by the bankers, but it seems that in this case that I, as the person divesting the stake, will need to put in considerable effort. The effort that I was too lazy to put when I was supposed to be trying to do the deal myself, without any asssistance from any bankers. Actually this is something that a lot of companies that indulge in M&A transactions forget about.

Think about your own incentives and the banker’s incentive. For the banker, this is just a deal. All they are caring for is to find a buyer for your sale, and a seller for anyone who wishes to buy stake. Once the deal is through and the cheques and documents signed, they ask you to sign on a set of fairly heavy cheques, and walk away; job done. It is you, as the company who is selling the stake, who has to deal with the new investor for maybe the rest of your life – transaction costs in these kind of deals are high, and it is preferable it be done exactly once.

One thing I realize is that the effort required here is of a different nature to the one that you need to put when in the market without bankers’ support. In the latter case, you need to engage in an elaborate ritual of tikitaka, slowly moving towards the goal, and then unleashing a shot at the right moment. It is a well-respected and common algorithm, and any attempts to side-step it, and use short-cuts, usually end in disasters.

In the banked world, though, one thing is clear – you are sitting in that conference room together in order to strike a long-term deal, and not for a random networking meeting. All parties in the conference room are aware that the reason they are all sitting there, together, is so that they can work out a long-term deal. And thus, explicitly mentioning the deal, and explicitly working towards it, are not frowned upon – like it sometimes is in the outside market. You don’t need an y tiki-taka here. Tiki-taka is also seen as a waste of time. You better follow a direct approach and just put the ball in the box and then have a striker shoot it.

And remember that in such brokered deals, there is usually no goalkeeper.

PS: I need photos of myself for the offer document. I realize that I dont’ have too many of those. I’m not too narcissistic in my photography exploits, and I dont’ bother to collect pics that others have taken of me, and hence the shortage. Last night, my mother looked through my facebook pictures and pronounced each of them as “useless”. So, if you have good pictures of me, plis to be sending me. If you dont know my email ID, just leave a comment here and I’ll give you my email ID.

10 thoughts on “50% Stake Sale”

  1. All the best skimpy ๐Ÿ™‚ Seeing a lot of similar deals in various stages of progress among other friends…Some of the deal terms are unbelievable!

  2. wht makes u so sure its going to be _just_ 50%?

    it could be one of those ‘i have minority stake but majority control’ takeovers ๐Ÿ˜€

  3. Actually, the banker does have incentives to make the deal a success. Repeat business in the IB case and grandchildren/extended family/’Khandhan ki izzat’ and all that stuff in your case. I guess in all agency businesses, the intermediary does have incentives to ensure the success of the deal. It would be really interesting if one could quantify this!!

  4. Good luck saar! I hope the deal works out. In case the investors crib a little, you could offer them a discount to the total price and ask the bankers to structure it as a derivative product.

    In any case, I hope the investor runs that happen shall not be entirely material non public information and shall be posted by you on the blog ๐Ÿ˜€

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