My Partner(s) and I Can’t Work Together; What Do We Do?

Quote: Disputes happen (my sanitized version of the often used phrase of unknown origin.)

It is tough to be in the business of serving entrepreneurs and not encounter a dispute or two between owners. I am not referring to the garden variety disagreements that happen on a daily basis, but major differences that lead to paradigm change. The most common form of this conundrum is one owner firmly believing that the glass is half empty and one adamant about the glass being half full. In this scenario, the more optimistic owner dreams of the future and touts expansion, investing and new hires; the pessimist blocks him at every step setting up an unworkable situation. So what do you do?

One of the techniques I have seen employed is to bring in outside consultants to set up processes to both help clarify the true nature of the differences as well as resolve them. One of my clients often used the phrase “says easy; does hard” and that is what I usually found with this technique. When people really have different business philosophies, it is difficult at best to identify all of the differences and just when you think you have, new ones seem to surface. Obviously, if you can’t fully identify the problem, you can’t resolve it. The stark reality is that in some business relationships, there exists what is referred to in many divorce filings as “unreconcilable differences” and when they are deep seated, attempts to resolve them almost always lead to failure.

Unfortunately, in this situation the only viable solution is the difficult separation / buyout / settlement approach. Now those that have followed my blog know that I am not a fan of liquidity provisions in shareholder agreements. Even if a price is set in advance, getting the appropriate financing can be a major hurdle. For some reasons, banks are not interested in loaning you money that is going to an important “former” partner and out the door leaving the debt behind to be serviced by the survivor. However, when this type of situation arises, in many cases the future of the enterprise is at stake so it is imperative that a separation be negotiated.

These transactions are very emotion packed and much like a married couples’ divorce, value seems to manifest itself not in the true worth of the item being negotiated but in the perception one owner has as to the importance of the item to the other owner. So terms and conditions as well as price suddenly carry with them a level of unreasonableness fueled by the years of feeling underappreciated or maligned and getting a deal done takes on a whole new level of difficulty.
So my advice here is first, to start a separation process if it is clear there are major business approach differences and engage advisors who are used to dealing with this type of situation. Qualified lawyers and advisors who have not dealt with this before tend to treat this as a normal sale which only delays the process. And be prepared to be patient because emotions add to the timeline, but do not place your business at risk by avoiding the issue. Unfortunately as we all know, disputes happen.

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