DAN EISNER

Founder and CEO, True North Mortgage

Rose Chen may feel she is in a tough spot, but she holds all the cards. The board will have no choice but to accept Chen’s decision to sell the company because they don’t have anyone to replace her.

Chen did not, on purpose or by neglect, train a strong second-in-command, and this decision has become a sword that cuts both ways. On the one hand, Chen is indispensable to the DiversiFind board; on the other hand, the lack of a strong management team must have limited the multiple offered by Gaspin Partners.

It will make little difference to Chen’s power if she meets with the board as a whole or individually. If she does meet with the board as a group, however, the members may be able to convince her to stay on with cogent arguments such as: 1. Receiving an offer to sell is exciting and scary at the same time. Wait three more days, and the decision to sell may appear unattractive again. 2. Four times may be just a starting point for negotiations. Gaspin Partners may have a little more gas to put into their offer before this is over. 3. Don’t fret that Gaspin Partners is moving on so fast; most acquisitions take months to close. If Gaspin Partners is willing to move on so quickly, they never intended to close the transaction in the first place. 4. Chen is kidding herself that she can take the next 18 months off. Gaspin Partners will likely lock her into a long-term contract as a condition of the purchase. This management agreement may hold Chen’s feet to the fire more than her current owners.

I find the arguments not to sell far more compelling than Chen’s decision to sell. Chen should create the structure and spend the time developing a strong management team (and, of course, growing the business). That will reduce her stress in the long run, but could also entice the next offer to be at the five or six times she really wants. Rose Chen decided to speak privately with each board member, beginning with the chairman. “The hardest thing I had to deal with was convincing my board that my position on the sale had changed,” she said. “It was important for meto reach out to each person individually.” It took Chen two days to reach everyone on the DiversiFind board and, not surprisingly, no one was keen to revisit the sale. Chen credited the chairman for moving decisively after she revealed her intention to step away from the business. Aspecial meeting was called and a successor was identified. Gaspin Partners was contacted and, within a week, the company was sold. Chen was persuaded to stay on for another three months to oversee the transition. “The door’s open for me to return after months,” Chen said. “But it’s too early to tell what I’ll want to do.”