by Emma Lathen
It does not always preclude plain gossip as the subject of Wall Street’s conversation.
“What’s this about everything.com buying Simply for $2 billion cash? Do they want to mess up that cash machine or will it boost the everything.com stock or both?” asked Jack Thatcher, recently made a name partner at Robichaux, Devane & Thatcher, New York’s leading boutique investment bankers.
His lunch partner was Elizabeth Thatcher, Head of the Sloan’s Ireland VC & IT division and inline to be the next generation’s leader at the Sloan, now the largest bank in the world as well as being private to be more agile, less regulated, and a boon for its few stockholders, the Thatchers being major ones. Elizabeth was also his sister but somehow they kept a Chinese wall between their business and personal life. John Putnam Thatcher, Chairman of the Sloan, and their father, never quite figured out how they did that.
As Wall Street insiders, the Thatchers probably dealt in knowledge more recondite than most. Elizabeth, Becky to her family and Elizabeth in her professional life, agreed that the deal was challenging.
“Brown is a throwback to the days when companies had to earn a profit or at least have some hope of it. He is selling out Simply and evidently won’t have a say in everything.com,” Jack mused. As the ultimate sales guy, he was optimistic, if unrealistic by nature, and he continued, “Imagine what everything.com could be worth if it was the only dot com that was profitable. He could help do it; but evidently won’t be allowed to do so. Our shares would soar; our clients would love us who are still in it; it would be plain great.”
“Dream on Jack.” Elizabeth said as the realist in business and their family life, like her late mother.
Jack was a bon vivant in the mold of his Senior Partner, Tom Robichaux, his father’s old Harvard College roommate, but without Tom’s need to have serial wives. Jack had managed to have the fun, or at least most of it, without divorce-court by the simple means of never having married.
With perhaps a more balanced perspective, or perhaps with his generation’s more realistic view of human relationships, Jack sighed and said, “Yes, yes, I know. And if pigs could fly, etc. and so on,” as he paused.
Elizabeth smiled. One of her pleasures talking with Jack is he could play both sides of the net, batting the ball back and forth, sometimes with the speed of tennis and other times at full tilt like ping pong. She wondered what speed level he would achieve now. Tennis she thought. He confirmed it by slowing down and saying, “And what will the Sloan do with its Simply VC investment?”
“Well we cashed in our everything.com stock as soon as we could legally dispose of it, which took a while. We came out well. Better than lately from what I see with their fluctuating stock prices.”
Jack paused over his fruit dessert, quite the opposite of the apple pie a la mode Tom liked and somehow managed to have routinely without gaining any weight, “What about Simply?” getting back to his original question.
“Jack, the simple answer is we will dividend the $100 million out; we have no immediate need of it for investment capital and our few shareholders, including Dad and me, like cold hard cash,” as she grinned. “And you too, of course.”
“Of course,” he said with his endearing smile which closed more than a few accounts, which he knew full well.
Elizabeth went on to say, “The offer was something Brown couldn’t really refuse. He runs a tight ship and Janet, the CEO now, is a chip off the old block as well as being tuned into the millennial and z generation behind it. She still has him responsible for carrying the water.”
Jack nodded and followed up with a sales guy’s question, “I’ll betcha he likes that too. What does he talk about? Worry about? And what’s he thinking?”
Elizabeth paused to answer. “He says he doesn’t understand why dot coms have all the trappings of traditional companies when they don’t need them. You know, receptionists, big lobbies, that sort of thing. Of course, I don’t know either but that’s what he tends to talk about.”
Jack nodded her on, so she went on, “We made our $2 million investment in Simply so Walmart would think they could handle more business. Brown said they didn’t need the money but needed the Sloan’s support to help with Simply’s reputation and balance sheet for Walmart. We agreed it was a reasonable proposition, as you may recall, and we did it promptly.”
“That worked. Simply repaid us promptly so we only got 5% of the company; if it had taken longer we would have gotten 10%. But, as you know, better to have a going blowing company than one that staggers along; so the 5% was and is fine. It is rather a big deal for us since we treated the investment as a loan due to Simply’s prompt repayment with interest. It will be a big cash payout for us at a $2 billion sales price.”
“In fact, a wow deal for us since it took little effort to do in the beginning, almost no oversight was required while they had the $2 million, and thereafter it was almost like money in the bank. Of course, we are corporately out of everything.com now so we don’t have much risk there except for some of our trust accounts that still hold some despite our advice not to do so.”
Jack asked, “How much is that?”
Elizabeth said, “I’m afraid to ask. The Trust department reports separately to Uncle Charlie. They have kept that number quiet. Everything.com is a real mess in my opinion, but you know people think I have a touch too much of Uncle Everett in me.” Uncle Everett, Everett Gabbler, was literally the VP of No in the now private Sloan Bank. He had a unique gift for finding the funny bone in anything, a good thing to a point but after that he could drive people crazy, and often did.
Jack ended their lunch by saying, “I didn’t need that much truth because some of our clients still have some too, that we haven’t been able to talk them into selling. If it goes up in price it is them holding out; if it goes down it is our fault for leaving them in. No way for us to win in this,” he lamented.
Elizabeth noted that Jack had picked up Uncle Tom’s habit of crying in his beer, but still having plenty of it so to speak. All of Jack’s investors had made a bundle with everything.com; Jack had succeeded in making all of them cash in at least half so they were all in the high clover and way ahead on their original investment basis, no matter what happened now.
Jack’s laments had always worked for Tom Robichaux to make his clients feel sorry for him, and others as well, so she thought this was a good developing habit of Jack’s for Robichaux, Devane & Thatcher.
Chapter 2
simply
The difference between making a buck & losing one is more than 2 bucks
Brown, founder of Simply and serial entrepreneur, was sitting with his daughter, Janet, now CEO, in his townhouse in Lincoln, Massachusetts. It was a lot smaller than the big house they had had on the lake in Lincoln that Brown called his Marriott. Large, spacious, rambling, and fine for his family of 5 kids. But, and it was a big but, he liked a simpler life as a former canoe guide and was a Thoreau groupie, according to him and others. His mantra was Thoreau’s, “Simplify simplify.”
Many people knew Thoreau’s Walden Pond but Brown preferred Walking, a mellow book relating to how Thoreau saw and got everything out of life just traipsing around nearby Concord, now built up. But nearby Lincoln was not so much, so Brown lived there. He liked to say he only lived a mile or two from Walden Pond so as to keep in touch with his soulmate so to speak.
Brown also emphasized that Thoreau was a successful businessman with a pencil factory and railed on against taxes like any Republican of the modern era. Brown himself was a libertarian, but found the party too small to do much with. He was big on the safety net, but not the bureaucratic goings on that cost everyone.
He traveled much like a canoe guide; a small bag with his electronic gear; 1 change of clothes; a toothbrush, razor, and no pills at 72. He walked at least 12,000 steps per day; had stopped any strenuous exercise due to age issues; and was back below his college weight due to less muscle and less stress without 5 kids at home, now having a smaller p
lace, and his wife occupied working.
Janet, on the other hand, enjoyed a more wide ranging middle aged life with husband, 2 children, a nice house on a nearby lake, access to their Brown family house in the New Hampshire White Mountains, and a bedroom devoted to her clothes. However, she was a chip off the old block regarding simplicity and keeping the business that way.
With that background in mind, and their whole life reflected in it, they were considering everything.com’s offer to buy Simply for $2 billion cash, an enormous sum in their minds since they owned the company free and clear, and had for a long time, except for the 5% stock owned by the Sloan.
“You know, Janet, everything.com is a ridiculous name but it seems to be very fashionable.”
“Yes and the name is tongue in cheek.”
“Yes, we must give them that. As you know, Jan, I’ve always been a pretty good minor league entrepreneur, starting in manufacturing when that’s all there was, having 100s of people to manage which seemed impossible at the time and even worse in retrospect. I have no idea how Walmart can run millions; I could barely do 100s back then.”
Janet knew this wasn’t true. He was legendary among his employees; but it had worn him down. She remembered her mother telling her she didn’t mind the sheriffs calling him at night to bail an employee out; but she did mind that he knew them by voice and liked them.
“Jan,” she had said. “He posted bail all over town so the tool makers wouldn’t have to hock their tools to get bail and lose a day’s work. He had a standing rule that anyone jailed like that could come in at noon without having to talk about it at all; ridiculous but effective.”
“What did he say about it?” Janet had asked.
“He said they only got drunk and jailed when they get anxious and couldn’t wait for hunting season to start. Then they could informally disappear and justify going away from their responsibilities by hunting. Some hunted; some just went away, according to him. It was fine with him; never get into it was his motto. Few people could do it; but few could do what he did either.”
“He used to tell me that dealing with tolerances as tool makers must, and having to get everything exactly right, wore them down. Not like engineers who just drafted stuff though he loved his engineers too.”
“But he had an engineering background.”
“Yes, but that meant he understood. And he had a gift for knowing people; it just wore him down. In his next time he was focused on having fewer employees and did. Then he decided to get into a business with no employees, and that’s Simply, just contractors and cyberspace.”
“What else?”
“Nothing really; he likes the lack of stress. As a younger man he could deal with it. He likes being old and slow, though he doesn’t act old and he isn’t slow. He is a good showman of course,” and she smiled. She still liked him some while most older wives didn’t like their husbands at all, or most men for that matter. She kept her point of view to herself but thought that men ran off by and large not for younger flesh but after happier women. Many of her female friends had had that problem, but she never let on why because then she would have lost them as friends. She sighed. Janet soon nodded. It had been a memorable and therapeutic conversation for both of them.
She was back to her father in her CEO role now. He saw she was back and introduced the subject of their get together.
“So we have a $2 billion offer. Our business is as simple and routine now as shooting fish in a barrel. Not much fun or sport in that. Jan, it is up to you. You are in charge now. What do you want to do?”
“This is an inflated offer. We did have $100 million in net profit on only $110 million in sales; we have a simple system selling the lowest priced and high quality audiobooks and eBooks. Our New York competitors, who are the only ones we have, still have old style hierarchical structures that require high pricing. We will continue to get royalties for 90% of the titles we produced ourselves or own outright. So that’s another $10 million or so a year. So, let’s do it.”
Her dad said, “Yeah, reminds me of a great scene in Heaven Can Wait with Warren Beaty and Julie Christie as actors at their best when the Beaty character when reincarnated as a billionaire buys the LA Rams. The seller, a great character actor whose face is familiar but not his name, says about selling the team, “He stole it from me.” When asked how, he said, “He offered me far more than it was worth so I had to take it.”
“Rather like us. But like him, we’ll take the money. OK. Let’s let them know,” and they did then by text as well as faxing over their 1 page signed agreement.
As Brown had said in the past, “Just because there are more zeroes doesn’t mean things have to be more complicated. And I got that from Sam Walton back in the day. Great point as were so many of his.”
The Agreement called for $1.9 billion to be wired to the Simply Sloan account and $100 million to the Sloan investment account in Ireland. In return, everything.com got 100% ownership of their 100 shares with no contingencies, guarantees, employment contracts, or any other hanging obligations other than to continue paying royalties on their homemade titles if they chose to use them. If not, they returned them to Brown personally. Simple, easy, neat, with no lawyers or advisers involved.
Chapter 3
everything
The salad days never last long enough
Jack Towson and Charles “Chuck” Newberg smiled as they looked at the signed 1 page fax from Simply. They had wisely signed the copy sent to Simply so once they signed it, the deal was done without the complexities of lawyers or advisors involved.
They had bagged the cashflow elephant, though a tiny stock valuation compared to their own heady one of $16 billion.
They had no cash but they had lots of currency in their stock. They believed that on the announcement they would get the company for free just on the stock price boost. They would be right and more.
Chuck had managed to borrow the $2 billion on a short term basis pledging stock to the Sloan to let them liquefy automatically as soon as their stock hit a market cap of $20 billion or whatever the market cap was in a week if it didn’t make $20 billion before then.
So with the signed agreement in hand, faxed to the Sloan that handled their money, and the $2 billion loan on the above basis, they drew down on their Sloan loan to wire $1.9 billion to Simply and $100 million to the Sloan VC division. Incestuous; all in the family, Elizabeth chuckled when she heard the money had hit the Sloan account. Essentially an infinite return given the Sloan never had any money out to get the 5% in the first place. The money had been allocated to the first 5%, plus interest, which was repaid in full on time.
With that all done in less than 5 minutes with a receipt from the Sloan, Jack and Chuck shut the door, lit up their non-PC cigars, Chuck swigged some cheap Kirkland Costco bourbon that was fabulous, and enjoyed the moment, while Jack had a fancy brandy suiting his high end tastes. They were long time roommates at Harvard College and Business School. They had continued that tradition when launching everything.com out of their HBS dorm room much like Michael Dell had from his at Texas.
They lived now in two great condos next to each other in a pricey location down the street from their luxurious offices in New York City, the center of the universe in Jack’s mind, though not in Chuck’s view. They were like many in their generation who had serial girlfriends but no marriages, as many of their female classmates had serial boyfriends but few marriages.
They were the ying and yang of business life. Jack did the dreaming and selling as the front man; Chuck carried the water and made things work day to day in the back office. People thought of them as the odd couple but didn’t seem to realize that their differences meant they never competed for the same things and frankly weren’t interested in them. All of this made for a pretty perfect partnership up until recently.
Chuck had forced Jack a few years ago to agree to liquefy their holdings so they each had $250 million out of the company. To please the Board they had done t
his back in the days at a $5 billion valuation so the company benefited from that sale as it was now worth $16 billion and hopefully more after the Simply news hit the Street.
When the announcement hit the wire, a few minutes later the stock popped up to a $20 billion market cap and everything.com got Simply for free plus an added $2 billion in market cap. Thus it was in the crazy hazy days of the dot com boom on Wall Street.
The Sloan had lined up $2 billion worth of buy orders at the $20 billion market cap price since several funds had no everything.com stock and needed some to keep their percentages in dot coms up, trend right, and please their investors, the most important thing for them. So, Elizabeth smiled upon learning that; she didn’t want to hold that loan for long; she was pleased the price was high enough to please the boys as she called them and made a tidy commission for the Sloan.
She texted Chuck the news making Simply free for them and, at the moment, giving them an additional $2 billion market cap boost. She didn’t think it would last at that frothy cap, but it was a dot com boom so who knew.
Upon hearing the news, Jack turned to Chuck much like Robert Redford did to his campaign manager in The Candidate and said, “What do I do now?”
Chuck smiled, noting the “I” not “we” which Jack had been using of late, and Chuck said, “Time to start your party now, Jack.” Jack took the “your” party in stride and smiled.
Jack tended to be secretive about his various goings on despite acting as if it was one happy family. It clearly was a nervous family of late since it had evolved into 24/7 Jack, Jack, Jack.
Chuck saw that baldly; Jack tended to fool himself, keeping his contradictory ideas tidily together, that he could be secretive while openhanded at the same time. Odd, Chuck thought; how well he deluded himself about it too.
