After running Carey of Chicago for the past 14 years, Clarence Braasch is ready to step down and hand the reins to his daughter Linda.
Company reputation, compatible clientele are keys for takeover; says Clarence Braasch.
I could be home collecting Social Security, but that’s not fun,” says Clarence Braasch of Carey of Chicago. And for the past 14 years, “fun” for Braasch has been building a quality operation through a series of strategic acquisitions and setting the stage for a smooth transition of ownership to his daughter Linda.
For Braasch, the key to fruitful acquisitions is analyzing the reputation, clientele, and financial well-being of the company to be purchased. In addition, he believes there are several important decisions that helped him adroitly “pass the reins” of his own company ownership from father to daughter. Expert legal advice and making sure the family member is skilled in all levels of small business operation are two essential ingredients to make the transition a smooth one.
Braasch originally purchased his company, which was established in 1926, in 1979 and has worked diligently to build it up to what it is today. The company currently maintains a fleet of approximately 30 vehicles—two-thirds of which are sedans, the rest are limousines—to service its mostly corporate clientele. All vehicles are owned by independent owner-operators.
GROWTH THROUGH ACQUISITIONS
Braasch and his daughter are working together to plan the future of the company. They have decided that the way for their company to grow is through a series of acquisitions. While they aren’t aggressively pursuing these takeovers, “If someone shows some interest in selling, then we’ll sit down and negotiate—play some terms. If we can achieve some kind of common ground, it’ll be a done deal,” he says.
When looking at a company to purchase, the Braaschs look for certain qualities. First, they look to see if that company’s clientele is compatible with their own. “You need to find out what kind of service they are rendering For example, I wouldn’t be interested in a company that shuttles back and forth to the airport. I’d only be interested in companies that are similarly situated in dealing with corporations,” he explains. They also look at the reputation of that company. “Most people in this business have a feel for the reputations of other companies. We look for a company with a good reputation that will fit in nicely with our operation,” he adds.
Next, they look for a small- to mid-sized company. “We are looking to acquire companies with five or six vehicles—somewhere around that,” he adds. Since Braasch utilizes owner- operators, he isn’t necessarily interested in purchasing the company’s vehicles, but that can be part of the deal. “Sometimes as part of an acquisition, we will purchase the vehicles. Then we just dispose of them in one way or another,” he says.
Once a company has been identified as one that will fit in with their operation, other business-related elements are examined. “We will go in and examine their sales, look at their assets, how long they have been in business—that sort of thing,” he adds. The company’s clientele will also be examined. If the company has any corporate contracts, that also is looked at. “Contracts aren’t always a great thing. When we bought this business, it had a contract with a major airline for crew transportation. It was a contract that I wasn’t particularly enthusiastic about because of the rates, but I honored it for a period of 18 months. When it came up for renewal, I stated my rates and the airline chose to take its business elsewhere,” he adds.
Braasch believes it is vitally important to very carefully examine the company to be acquired. “While checking the books and accounts, you may find names they no longer do business with or dissatisfied customers. You could find you are buying a dead pigeon,” he says. As the deal progresses, he says the level of disclosure rises. “If somebody is going to acquire my company, I am not going to immediately reveal everything because if the deal falls through, that individual has a lot of private information. So it’s an on-going process. The closer you get to putting the signature on the bottom line, the more disclosure you will have.”
Once the company has been identified as one to be purchased there is a transition period that becomes necessary. “You let there be a transition period so the purchased company’s clientele can become accustomed to the new arrangement. We seek the support of the owner or manager of the company to continue the relationship he had with his clients while they gradually adjust to the new situation. I’d say this should last no longer than a year, but the actual time frame will vary with each situation,” he explains.
PASSING THE REINS
To Braasch, tracking the details of acquisitions is as important as ironing out the particulars of transferring his company to his daughter. Linda has been with the company for the past five years and has been president for the past two years. “She is very qualified to manage a business. She joined the company when she indicated that she was interested in doing so,” he explains. Linda, who has an MBA in marketing, came to the company after working in the corporate world for nine years. “I identified that I was better working in small business. You can see the results of your efforts more easily. At the point in my life when I decided the small business aspect was very appealing, dad’s business was expanding. He worked on building this company for the past 14 years and I wanted to carry on those efforts,” she says.
The Braaschs are currently in the process of ironing out the exact details of the transfer. When the elder Braasch moved into semi-retirement, he stepped down from the position of president to secretary/treasurer and Linda moved into the president’s seat.
While they don’t have a written plan, “We have an understanding and I’m in the process of exploring stock transfers to the children so they will have an ownership relationship as well as an employee relationship. We are trying to reduce the tax consequences as much as possible from the transfer,” he explains.
Linda has three other siblings, two of whom are involved in the company “One of the legal issues we are dealing with is how to handle the participating siblings from the non-participating ones,” she says.
“As far as the direction of the company is concerned, my plans are pretty much similar to those of my dad. We have been making minor adjustments together,” she adds. “I’m here for consultation if she has a question concerning something that I might know about. Otherwise she makes the decisions and calls the shots,” the elder Braasch adds.
While there is no set timetable for the transition to be complete, the elder Braasch envisions it to take place sometime in the next three years. He explains, “That’s primarily because of my age. I’m 67 now. I’d say 70 is the max.”