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Remember, your current deal is rarely your last deal. . .

February 22, 2007

Do ethics matter in business?  Does it matter if it is ethical if it is legal?  Sometimes it is hard to do the right thing, especially when everyone is telling you to do the opposite just because it is legal.  We were working on a very small acquisition at Architel for the last couple of weeks.  The company’s investors fired the CEO and as a result almost 70% of the staff quit (quite a testament to the loyalty of these employees).  We began discussions with the investor to take over the business.  Our offer would make the investor whole, but it didn’t provide a return on his investment.  The company is in distress and has about as much revenue as it has in debt.  Our discussions have been going on for a couple of weeks and yesterday we supplied the company with a letter of intent and term sheet.  We knew we were a few hundred thousand apart, but we decided to present our offer formally.  We didn’t get a response until just after lunch today.

One of our employees came into my office and reluctantly explained that the CEO of the company we were looking to acquire contacted her last night and indicated that they had decided not to accept our offer.  I was a little shocked that the CEO would contact my employee instead of calling me directly.  She then explained that he had made her a job offer she couldn’t refuse and handed me her resignation letter.  I was floored.  On the flip side, our salespeople had been contacted by various customers of the company who were concerned about the viability of the company throughout our negotiations.  Instead of piling on doubt, we notified the company and explained which customers contacted us and offered advice to fix the various situations.  Legally, we could have attempted to turn these customers into Architel clients, but ethically we felt it would be a mistake.  I think we made the ‘right’ decision.

I guess over the years I have learned that your current deal is rarely your last deal.  In the overall scheme of things this employee leaving our company won’t ruin our business, but on the flip side it won’t save the investors business either.  What it will do is taint my opinion of the investor and his CEO forever.  Additionally, everyone else involved in the deal including our lawyers, accountants, consultant and employees will remember how the investor and his CEO behaved.  It will cloud any deal or transaction the investor is involved with from now on.  I have made mistakes in the past, many that I regret and some that impact my ability to conduct business.  We all have.  My advice to anyone in business is to consider your actions outside of the scope of your current deal.  Think about how they might affect your next deal and the deal after that.  It is a very small world, trust me VERY SMALL INDEED.

Written by Alexander Muse · Filed Under Blog 

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