He Crossed the Line

Chapter 4 -- "Just the good ole boys."

"What happened next?" An investigator keeps pressing for details.

"He had this hospitality suite. I heard others talking about it, so I knew it wasn't a come-on to get me in his room. So, I went."  LaTonya's eyes glanced up to the left in a recalling memory gesture.

"He came up with a joint venture idea, that our firms work together to supply electrical components to an automaker. It made sense, seemed like a possibility, we were trying to gain inroads in that industry. I told him I would have to take it to Mr. Smith. When Sean focused on business, he could use that charm to really sell. It was an idea that would utilize our Mexican operation and might get Smith Electronics out of its hemorrhaging cash flow crisis."

LaTonya took a breath and glanced over her shoulder. "So that night, I called Mr. Smith and outlined the idea. Mr. Smith felt we should explore it. So, my instructions were to invite Sean to Atlanta for further discussions. It led to Sean coming to Atlanta the following week."

"Then what happened?"

"Mr. Smith was anxious to meet with him, to explore the joint venture. Two days before, our re-financing discussions with the bank fell through; then, they were pressuring to call in the loan for full repayment. I shared with the bank's loan committee that we had a joint venture opportunity, and they put out a new loan package, but at substantially higher rates and shorter terms. We were really getting backed into a corner. When Sean came down to Atlanta, he brought his brother, Patrick, the CFO along.

"So, how did those discussions go?"

"It seemed to go well at first. Sean said they were closing a deal to supply the computer control modules for a car manufacturer, and that they were willing to subcontract with Smith for the manufacture of the PC boards, from our Mexican operation. A million-dollar project over two years, to start in 6-9 months. It looked like a way out, a big order, up-front cash flow, and an opportunity to stop the cash flow drain from Mexico. I put together a counter-proposal to the bank, seeking better rates and a longer-term."

"How did the deal get from a joint venture to Smith Electronics being acquired by O'Rielly Electronics?"

"The bank wouldn't give, they wouldn't wait for the joint venture to come together, they pressed for the high price package. So, when we met with Sean and Patrick the following week, I had proposed modified terms for the joint venture. Somehow, the O'Reillys found out about our circumstances and they held fast." LaTonya looked out the window at the sprawling city below, frowned briefly, probably from dredging up the tension of the merger discussions. She took a sip of wine, then continued her story.

"Then, they proposed the acquisition. Patrick already had draft numbers worked up. Subject to a due-diligence audit, O'Rielly Electronics would put up, fifty million for sixty percent of the company. They offered to pay down half of the bank loan, and carry the rest. But, here's the kicker, Mr. Smith would have to step down as president. Their offer included a ten million severance package, and he would remain on an advisory board."

"So, the O'Rielly's offered to bail out SEC, but they wanted to take over and run the company?"

"Yeh, Patrick with his PowerPoint slides had all the numbers and what-ifs covered. Sean schmoozed and charmed the ole man with what I thought was a bull-shit story of the Smith legacy in the community and the benefits of enjoying the trappings of the success of his business in retirement. They really poured it on. Then they took the ole' man out for dinner, just the good ole boys, ya know. No one else was invited to come along, none of us lieutenants. They came back the next day with a letter of intent, signed by the O'Riellys and Mr. Smith. The long and short of it was they reached a definitive agreement and the government regulators and the banks all approved of the sale."