Second-Time CEO Buys a $30m Title Company

Randy, there were a few features of the acquisition process itself that were tricky. I'm thinking of the F reorg and the reps and warranties. Which do you want to tackle first?

Well, let's hit the F reorg.

Yeah, we had been working on the deal since July and I had been in South Bend, meeting with the executive team, kind of sharing what I thought our strategy would be after we got the deal done. And Mark, the CEO at the time, right after we were done meeting, called me into his office and we were chatting for a little bit. And this was just right after the election.

And he shared with me, hey, you know that Georgia Senate runoff if the Democrats win? I'm not sure that we're going to be able to do the deal if we don't get it done by the end of the year. Needless to say, that shook me a little bit because I didn't think we had a chance of getting the deal done by the end of the year. Um, so I was driving and.

Wait, sorry, Randy, just refresh our memory. That was a key state election. And if the Democrats.

So. So just give us a little bit more on what he was. What behind what he was saying.

Yeah, so that was. The two Senate seats in, in Georgia were up. They were going to have a runoff and it was going to affect the balance of the Senate. And the fear was that the capital gains tax treatment and structure would change retroactively to January 1st if the Democrats took control of the Senate.

And so they really wanted to get the deal done by the end of the year. My concern obviously was we hadn't made enough progress and to try and get that deal done quickly. It was complex. It's a 30 plus million dollar transaction.

It really felt unlikely. So I spent half my drive home from South Bend, Indiana to Minneapolis talking to investors, talking to our attorney, and finally calling Mark and saying, hey, I think we got to pause this thing until we see what the results of the election are. And he agreed. We both knew it was a risk, but in the search space, you accrue those bills pretty quickly.

And if your bills get big enough, if the deal doesn't happen, your search is over. And so it was not a risk I was willing to take to lose the rest of my search for a deal that might not close because intellectual action went a certain way. Thankfully, about a week later, they had an accounting firm who realized, hey, it's an S corp.

Let's do an F reorg, which creates a taxable event for the sellers. And we did that on the last day of the year so that we could buy ourselves more time into 2021 to get the deal done. And really the crux there is they just had to determine and make a final election on how they wanted to be taxed.