“You can’t handle the truth!” he barked while on the witness stand.
The colonel was referring to the grim reality of war and combat, and the fact that the information he had was too sensitive for Tom Cruise’s character. The truth, however, ultimately proved to be the downfall for Colonel Jessup, and it took a dramatic courtroom scene to reveal it.
The truth will come out, whether you’re talking about a military courtroom or a printing company merger and acquisition. Over the course of time, the truth reveals itself, and the guilty party will suffer the consequences.
The amount of time it may take for the truth to be revealed, however, is another story. And the damage that can be inflicted on all parties involved can be embarrassing at the least, and disastrous at worse. Take the case of Tervis Tumblers and the printing company Trinity Graphic USA as an example.
Tervis vs. Trinity: A Lose-Lose Situation
A January 31, 2018 article that appeared in the Tampa Business Journal profiled the lawsuit filed by Trinity Graphic USA against Tervis Tumblers. The lawsuit, filed in federal court, alleges that Tervis caused more than $25 million in damages by violating a non-disclosure agreement.
The case involves a proprietary printing technique used by Trinity Graphic USA. The technique in question allowed for more effective printing on transparent wraps which would enhance Tervis’s signature tumbler glasses.
As you can imagine, a fair amount of damage has been inflicted on both sides. Any time news of this nature breaks, there is very seldom a clear-cut winner or loser.
Reputations are called into question, and in the unforgiving court of public opinion, there will always be a cloud of uncertainty and doubt attached to both companies, right or wrong.
The issue here is that “the truth” has been called into question via a lawsuit. “The truth” will be put to the test, and we will soon see who had taken the proper steps to protect themselves in the event that this kind of thing happens.
And that’s my point: How you proactively handle “the truth” in your own personal exit through a M&A may be the only thing that can provide protection in the event that wheels come off the wagon.
It’s More Than Integrity – It’s About Preparation
My father was an innovator and entrepreneur in the printing and converting industry for years. It was back in the day when your handshake and your word counted. At least it counted a lot more than it does today.
When you’re either buying a company or selling your own company, you need to take important legal steps to ensure you’re protected in an event like the Tervis-Trinity lawsuit. I’ve seen lawsuits take down companies and careers. So here’s what you need to do to ensure you’re not at risk:
Get it in writing as soon as possible
The world would be such a wonderful place if all it took were a handshake and a person’s word. Not any more. Get your business agreements formally authorized before any work begins. In the early days of my consultancy business, I took people at their word too often, assuming we’d get a contract in place at some point. That was a hard lesson to learn. Get it in writing early so you don’t suffer the consequences.
Exchange non-disclosure, non-circumvention agreements
Non-disclosure and non-circumvention agreements will weed out a majority of the potential bad apples right away. When you get contracts formally authorized in place in exchange for safeguarding proprietary information, it adds a whole new level of protection and legal enforcement for your own company.
Have these been violated in the past? Sure. Will they be violated in the future? Absolutely. But this is but one of a series of steps that are designed to keep you out of the courtroom, so view it as another part of the protection strategy.
Background checks are a must
For a smaller company, the prospect of working with a larger enterprise can blind you. No matter how big a contract is, you will lose money on it if it winds up in litigation. So you need to do extensive due diligence on the company you’re going to work with.
Some tips include:
- Check a company’s filings with the SEC (if they’re public)
- See if their filings with the Secretary of State are up-to-date (or whatever institution oversees commerce in your respective state)
- Conduct searches on state and federal websites to assess litigation history
- Check references
Build your own legal team, and don’t skimp
You’re going to need a legal team behind you – there’s just no way around it. Use the same due diligence process on prospective legal assistance that you used with the potential partner. Your legal sourcing is going to be an important part of your organization.
You want a specialist with a proven track record and integrity, and they must understand the owner business. Interview at least two to three potential lawyers. And most importantly, don’t go cheap on this.
You don’t necessarily need to break the bank with a quality attorney, but hire someone who is highly reputable and well-established. Your legal team must know the law, while you need to know and trust the people you hire for the job.
Keep Honest People Honest
There is a story about a man who bought a piece of property in a rural town. He was told when he moved to the town that everyone was friendly and trustworthy. That’s why he was surprised when he noticed his neighbor installing a new lock on an outdoor storage shed.
“I thought you could trust everyone around here?” he asked.
The neighbor smiled. “Just keeping honest people honest.”
That’s ultimately what it’s all about. Protecting the truth in your exit M&A is about establishing parameters for the handling of sensitive information. It’s ensuring that both parties are crystal-clear on what is right, and what is wrong. It’s hopefully to avoid a case like Tervis vs. Trinity. Ultimately, I would recommend you follow my father Carlo’s lead. He exited successfully from his company many years ago, adhering to his beliefs and values. He told me, “Just do the right thing, always.”
Let that be your guide and you will not only handle the truth, you’ll live it.
Rock LaManna, President and CEO of LaManna Alliance, helps printing owners and CEOs use their company financials to prioritize and choose the proper strategic path. Rock can be reached by email at firstname.lastname@example.org.