My hobby is prairie restoration, which means that most weekends you will find me in the Cook County Forest Preserves near Chicago with a chainsaw or some other power tool. My favorite activity is to cut non-native invasive trees to make room for native plants and other ecological activities. Lately, we took on a project to cut up trees that have been down for 10+ years. Most of these trees have become semi-petrified and very hard to cut. As I was out there on a recent weekend in 90-degree heat in soaking socks, I noticed the parallels between chain sawing and business.
It sounds very simple, but work is much easier with a sharp saw. Abraham Lincoln may have said, “Give me six hours to cut down a tree and I’ll use four hours to sharpen the ax.” Chainsaws are much quicker, but the concept still applies. We usually take our dull chains to the local Stihl dealer to get them Game-of-Thrones’ level sharp. In between trips to the dealer, we use a file to sharpen up the saw.
In an M&A deal, being prepared is extremely important. The company might be doing great, but not being prepared is like having the best chainsaw in the world and a dull blade: you get nothing but smoke. It is important to take the time to get prepared before going to market. For example, getting financials reviewed or audited, having your attorney review your corporate documents, and having a sell-side quality of earnings prepared will give buyers more confidence. This leads to fewer questions and a smoother process. Buyers prefer to get sharp answers quickly. It takes time, energy, and money to prepare for a deal, but it can pay dividends through higher valuations, better terms, and a quicker deal process.
Why would anyone use a dull blade? Because it is cheap, familiar, and does not take much investment. It is easier in the short term to just keep using a dull blade, but the output will not be ideal. As Wolfgang Puck said, “The best restaurants have the sharpest knives.” Nobody likes mushy tomato slices. Customers, employees, suppliers, and others can tell if a business is using old equipment. If the Employee of the Year is the maintenance guy, something is wrong.
Sometimes, you do not notice that the blade is getting dull. It is the Stockholm syndrome of chainsawing: the chain is going dull, but it happens gradually so you do not notice. Somehow, you are working harder but getting worse results. If you are getting more smoke than sawdust, it is time to step back and re-assess the situation. It might be time to sharpen or replace the chain. Many owners do not realize that the company has fallen behind, let alone why. Take a step back and ask customers or other related parties for honest feedback. If the owner does not do it, the buyer certainly will, and the owner will end up leaving money on the table.
New, well-maintained equipment is more efficient and often pays for itself. It is not always easy to bite the bullet and make substantial investments in the business, as that can be risky. It is easier to use an old chainsaw that you have fixed 20 times than buy a new one that has some new, unfamiliar features. However, the first time you hear that sucker roar you will wonder what took you so long.
By the way, if one is wearing safety equipment, is properly trained, and is careful, the chainsaw is not the most dangerous part of cutting down a tree. The most dangerous factor is the tree itself. The tree might look like it will fall one way, but it can end up falling a different way or getting stuck in another tree. What is even more dangerous is your nearby buddy who is also cutting down trees but might not be looking out for you. This just shows that one must be prepared for the unexpected.
M&A deals and running a business are hard work, just like chainsawing massive, rock-hard downed trees in 90-degree heat and humidity. Using a dull blade or old equipment just makes everything harder when chainsawing, just like being unprepared makes it much harder to cut the best deal.
Tom Kastner is the president of GP Ventures, an investment banking firm focused on sell-side and buy-side transactions in the tech and electronics industries. GP Ventures has offices in Chicago and Tokyo, with five people in total. Tom Kastner is a registered representative of, and securities transactions are conducted through StillPoint Capital, LLC—a Tampa, Florida, member of FINRA and SIPC. StillPoint Capital is not affiliated with GP Ventures.