“Even the violent end, the matador on his toes, sighting along his blade, the drop of the cape, the sword buried in the bull’s shoulder to the hilt, the blood on the sand…had a strange, primordial attraction…”
Sometimes the Bull Wins
In late May 1997, our board held a meeting at the Willard Hotel in Washington DC. Board member Bob Hatfield, the former president of the Alaska Railroad, had traveled more than 20 hours to DC from Belo Horizonte, Brazil. The logistics of attending our board meetings were challenging from his new home in Brazil. For years a disciplined attendee and valued contributor, he had missed the prior two board meetings. As the president of a Brazilian railroad, Hatfield was wrestling with a new role, a new culture, and Brazilian Portuguese. As we gabbed away prior to the board meeting’s start, a usually expressive Hatfield stared in silence at his talkative associates with an uncharacteristically blank expression. When I finally asked, “Robert, are you all right?” he deadpanned, “I hadn’t heard this much of a familiar language spoken in months…I’m just adjusting to my ability to comprehend!” Then out came Hatfield’s hearty laugh, and the reunion was on.
It was an exceptional moment in the history of our firm. The information contained in the preliminary board packet was all up beat. Led by one of our best executives, our host branch delivered an outstanding presentation. The rest of the agenda was full of good news. We had paid off a convertible subordinated debenture early. The launch of our sixth and newest branch had begun in earnest, and our seventh branch was on the drawing board. Our quarterly results were strong, and our financial position excellent and getting better.
Moreover, I had a big announcement to make. Our franchisor’s newly emplaced president had approached me with a serious entreaty to immediately begin negotiations to buy our firm. This was fabulous news for the board. Although we had long been interested in being acquired, we sensed it was important that they approach us first. Historically we had been one of their most award winning and most closely allied franchisees. Yet, our franchisor had now clearly prioritized the acquisition of firms less affiliated. For over a year they had been forward integrating into our channel, and had not expressed a recent interest in our firm. We began to believe that in our franchisor’s view, our effective relationship had made our firm a low acquisition priority. Why should they buy an alliance that they already controlled?
In the months preceding this meeting, we had worked out a set of steps to change the status quo and unsettle the relationship. First, in a low key but obvious fashion, we developed a plan to go public and began to execute systematically on the plan. Then we opened our two newest branch offices in markets where our franchisor had major initiatives: the first adjacent to one of the franchisor’s owned-branches, and the second near one of the franchisor’s financially sponsored locations. After that, we leaked that we had engaged our franchisor’s competitors in a bid process to determine our primary source of supply. Our last step was to dramatically eliminate their conversion options by paying off our subordinated debentures early; thereby limiting them to a 19.9% minority stake in our firm. With each step, we reaffirmed our relationship, but acted increasingly disaffected. However, the bravado aside, our stratagem of visiting this sequence on the relationship seemed as if it was having little to no effect. Worse yet, we were running out of ideas to give them cause to initiate the acquisition conversation.
Just at the point we had become concerned, our franchisor made their move. We now had our Letter of Intent and would soon be deep in negotiations. To further unsettle our franchisor, after they announced their interest to buy our firm, we recommended that their board seat be temporarily vacated. We argued that there were potential conflict of interest liabilities if that seat remained filled during acquisition negotiations; and they agreed.
As we walked through the discussion and decisions at the Willard Hotel, our board was visibly delighted with the news. With negotiations now ready to move forward, it was clear our firm was on the brink of its greatest opportunity. We knew also that we had our most difficult challenge ahead — fighting through an exit game with a Fortune 500 firm’s executive team. Nevertheless, that would all wait for later. We could not help but savor the moment.
After a rigorous strategy session with the board, that night at Sam and Harry’s Restaurant, all spouses and board members settled into a private room. Sam and Harry’s signature service took over. The meal was spectacular and the conversation a raconteur’s delight. Frank Danner was delivering one witty tale after another, and Bob Hatfield was not far behind. Susan Hatfield joined in with her humorous stories. The tears of laughter were flowing as well the wine.
Sam and Harry’s assigned a maitre’d to orchestrate the service for our private dinner. He was excellent, and his wonderfully thick French accent added a distinctive charm to the service. In the midst of all the fun, I noticed our maitre’d’s behavior. During an anecdote by any dinner guest, he seemed to drag a leg to stay in the room. He would find a fork to move, napkin to pick up, or wine glass to fill — until a punch line was delivered — then he would dash out quickly and return before the next story began. I finally caught his timing, and asked if he “enjoyed a good humorous story?” His eyes lit up, and he impishly said, “May I” as he pointed to the front and center of the private room. Then our maitre’d, with the encouragement of the entire room, took the “center stage” and told this wonderful tale…
“An American, who enjoyed exploring cultures and custom, was visiting his Spanish business client in Pamplona. He was invited to join his friend on a balcony at the Plaza de Toros, the bullring, for an evening of the “National Sport of Spain.” At the bullfight, the American was caught up in the pulse of evening; the enthusiasm of the crowd, the choreographed tradition of the battle between man and beast, where the grace and courage of the matador was juxtaposed against the raw power and animal instincts of the bull. 
Even the violent end, the matador on his toes, sighting along his blade, the drop of the cape, the sword buried in the bull’s shoulder to the hilt, the blood on the sand…had a strange, primordial attraction that the American visitor could not begin to explain.
The Spaniard recognized in his friend and client a passion for the sport that escapes most American attendees. In recognition, he invited his American guest to a very exclusive “after-fight” celebration, “Los Festejo de los Aficion,” at the famed Hotel Montoya. The dozen or so select guests, aficionados, were invited to a special banquet room. Once there, the superb preliminaries led to the grand main course.
However, when the servers arrived, the American was shocked. The main course looked awful, and over-large, and the course hung over the serving platter gracelessly. His Spanish friend explained that at this traditional meal, the cojones of the “defeated one” were served. The American braced himself. Yet, on tasting the main course he found it was most delicious. He asked for seconds…and then thirds. Relieved, the Spaniard honored his friend with a toast and an open invitation to return to Pamplona at his pleasure — to the Plaza de Toros and to Los Festejo de los Aficion.
A year later, the American returned to Pamplona accompanied by the president of his firm. He could not get the fights and the “after-fight” celebration out of his mind, and built his travel partner’s anticipation as he raved about this strange and wonderful traditions of the ring and the exotic food. Travel delays prevented their attendance at the first night of bullfights. Fortunately, the Americans still had the after-fight celebration at the Hotel Montoya to look forward to.
Upon arrival at the Montoya, they were shown into the exclusive dinner gathering, where their Spanish host was most gracious, and the aperitifs prepared them for the preliminary courses that followed.
Finally, the main course arrived. Once served to center table and the covers were removed from the platters, the American guests were taken aback. Instead of the overlarge, “hanging-off-the-platter” main course, the course was very small, smaller than a large fisted-hand, and certainly not enough to feed the dozen guests. Disappointed, the American said to his Spanish host with concern, “What is this?” And then the Spaniard, shrugging his shoulders, gently explained, “I’m so sorry, but…a veces gana el toro…sometimes the bull wins.”
On the delivery of the punch line, our room erupted in laughter. Even with all the merriment, the relevance of this story struck me. Throughout the evening, the inescapable subtext was that our most formidable business challenge – the exit process – lay ahead. We knew we would have to contend with an ominous mix of elements. While our potential acquirer waved in front of us this entreaty of acquisition, their policies and actions were increasingly aggressive and a risk to our firm’s welfare. By their forward integration, our franchisor, our market partner, was quickly becoming a direct competitor. We had been left no choice but to counter their moves and demonstrate we posed a danger. It seemed clear that we had entered a choreographed competition, the business equivalent of the Plaza de Toros. The maitre’d’s story became our metaphor. Much like the bull facing the matador, we knew if we tired, our franchisor could soon be sighting along their blade, and dropping the cape.
As the evening was ending, I stood, raised my glass, and proposed a toast, “To the bull — because at times the bull wins.” Then, all those around the table responded enthusiastically, “To the bull!” In the end, the maitre’d’s anecdote was prophetic.
©2009 Ancala Equity Partners / Timothy P. Fargo all rights reserved
Next: Back to the beginning — positioning to the current.
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Tim,
That was indeed an unforgettable evening. Reading your post I was back at the Willard with that wonderful group of friends. I smiled the entire time I read this!
That dinner marked the end of a stage of our company. Our progression from that point forward was steep and challenging, yet never stopped.
Bob
Interesting to gain some perspective and insight on what went on behind the curtain. I am struck at how business is such a strategic game. Not just making and selling goods and services but the positioning for the end game of the business itself. Hmmmm, always learning.