Chapter 31

DREW

When Roy said he had not been called after three days, Drew thought his involvement with the company was over. However, the next day he got a call from General Manager Willard Brandt’s personal assistant. Brandt was the top officer of the subsidiary company, rather than a President or CEO. He had taken over only three or four months earlier.

When the assistant said Mr. Brandt would like to have lunch with Drew in the executive dining room, Drew refused. When the assistant asked why, Drew answered “The last I heard, there would probably be legal action between the company and me. Under those circumstances, I don’t think it would be appropriate for me to meet with him privately.”

“I assume that is on advice from your lawyer,” the assistant said.

“Actually, we never considered this possibility, but I am certain that is what he would say,” Drew agreed.

“I will convey your message to Mr. Brandt.”

Not too much later, Mr. Brandt himself called. “Mr. Rosen, there will be no legal action from our side. I am told we have no grounds on which to file. I would like to find out why you are leaving. I suspect there are some things I have not been aware of that have serious implications for our success. Would you meet me at a restaurant?” Drew agreed and a time was set for lunch the next day.

Conversation started as soon as Drew and Brandt were seated and ordered drinks. “Could you tell me in one concise sentence the main reason you are leaving?” Brandt asked immediately.

“I need to get back to doing research.” Drew said quickly.

“I thought that’s what you were doing.”

“No, it is more product development. True research generates patents. Almost none have been filed from within the company recently.”

“Is that because of the change in the royalty agreement?” Brandt probed.

“It is certainly a factor. Everyone is busy trying to prepare products for the approval cycle. Lately, that has meant having no time for patentable work. It has often meant having to pay royalties for the patented work of others.”

“Other than the personal rewards from royalties, why are patents so important to you?”

Brandt saw the flush of anger cross Drew’s face. The question was so unexpected and so absurd that he could not control himself. Brandt recoiled slightly and then looked puzzled. “That question made you angry. Why?”

“Because it made me feel like a fool for sacrificing several years of my career out of friendship and respect for the company founders. I’m guessing you are not aware that the purchase was contingent upon either me or my friend Pete signing a retention agreement for four years.”

“No, I was not aware of that. I was not the original GM after the purchase,” Brandt reminded him. “I still don’t see what triggered your reaction.”

“The consultants who brokered the purchase knew that Pete and I were the foundation of what had made the company successful. What the two of us did was pure research - research that generated numerous patents. The anger was for two reasons. The most personal one is you have no idea of my role in ABG’s success and what a slap in the face my current treatment is. The second is that you have no idea that without a solid stream of patents, the company’s years are definitely numbered.

“There is money to be made on the products ABG is now or will soon be selling. That is because ABG shares ownership in key patents that prevent competition without them paying royalties. That is the only way significant profits are made in this business. But the patent stream is being used up with the products now in the approval cycle. What will you do for the next generation? What patents will they be based on? Or will you be reduced to renting the technology from others?

“My friend Pete, the one who refused to sign the retention agreement, warned me that ABG’s days were numbered for another reason. Hi-tech buyouts and mergers only work when there is at least a symbiotic relationship with the buying business. I think you know that relationship does not exist in this case. ABG is still the corporation’s only move into the medical field.”

Brandt was thoughtful for a while before saying “You act as if you have been mistreated, yet you are paid more than most of management.”

“That’s because I am no longer allowed to do what got ABG where it is. It is because I am buried reporting to a snot-nosed B-School grad. He is too busy trying to make his textbook processes and formulas work to find out anything about the business or the capabilities of the people under him. I am guessing that all you have heard from him is how badly my salary is screwing up his payroll budget.”

Brandt’s eyes actually widened visibly at that shot in the dark. “If things are as bad as you say, how can we turn them around?” he finally asked.

“You have not been here long enough to lose your head over ABG’s demise,” Drew offered. He was amazed at how easily he was talking to the man. Here’s what you should do. Go ahead and pay some consultants to verify what I just told you. Then suggest to corporate that they cut their losses and sell the company to a group that I will put together. We will probably offer about 35% of what was paid five years ago.”

“Thirty-five!?” Brandt almost shouted.

“The consultants will tell you what is reasonable. They will also estimate the loss if you try to stick it out. It won’t be much use to me more than six months from now.”

“So you are seriously telling me to get out while I can and try to come out of it as the good guy? What do you care?”

“I don’t care how well you come out of it. I do care if I can get the company and put it back close to what it was.”

“Why didn’t you just suggest that we put it back the way it was without selling it off?” Brandt demanded.

“I doubt corporate would let you spend the kind of money on research that you need.”

Always the one to have every fact in place before taking a position, Drew was surprising himself at every sentence. He was absolutely making some of it up, yet it just seemed right. He had no idea how to put together an investor group, but it seemed right. He felt like he was talking down to the GM and it felt ... liberating.

“I suppose you know a consulting group that can verify your statements,” Brandt said with an edge.

“No idea,” Drew replied. “It would probably be a good idea to talk with the ones who did the deal. You should probably have someone else, too, though. They may be too close to it to be considered objective. There are companies who specialize in valuing other companies for purchase or sale.”

“And you honestly believe I could end up the scapegoat if your predictions come true?”

“I would say look at other sell offs or shut downs within the corporation. See what happened to those GMs.”

“I asked you to lunch because I thought your departure might mean there were some problems. I never expected what you have told me. I have worked very hard to get where I am and I do not want to ride a sinking ship down, if that is what this is. You can believe I will have your claims checked out - quickly.”

On the way home, Drew kept trying to figure out why he had essentially bragged about buying the company. All he could think of was that Rebecca and the Gang had suggested finding investors and forming his own company. Could he really acquire ABG still somewhat intact? If so, could it ‘catch up’ from the mismanagement of the last few years?

Still adrenalin charged, he called Pete’s office number and was lucky. After brief greetings, he asked “If I can put together a group to buy back ABG at a bargain price, will you come back?”

“In about five minutes. Are you serious?”

“I don’t know. And I don’t know anything about building an investor group. I know some people that know people, though. I’m driving right now. Let me call you later and tell you about what has happened.

As soon as he got home, he called Carole Gruden. “How would I go about assembling a group of investors to buy back ABG.”

Carole was silent for several seconds, then chuckled and said “Whoever you are, your voice impression of Drew Rosen is very good. Can’t be him, though. He doesn’t have the presence to pull off something like this.”

“I heard he was changing since you women got his pants off,” Drew quipped back.

“Seriously, I can try some contacts for you. You know Magnuson is the big money behind Transformations. We’ve made some really good connections there.”

“Magnuson? Doesn’t he already have some money into medical research?” Drew asked.

“He, or the Foundation, seems to have money into just about every legitimate business sector,” Carole acknowledged. “Drew, we’ll get working on this for you. I’m so glad to see you taking the initiative on this.”

“Oh, Carole, can I give your name to Brandt. I think he needs to see the comparisons you showed me.”

“If you can convince him to contact me, I will definitely talk to him,” Carole agreed.

WILLARD

Willard Brandt was very upset. This had been his big step into a General Manager’s position. It was something he had worked hard for, sacrificing his marriage in the process. Now, what had been portrayed to him as a plum position might turn out to be career quicksand for him.

The quarterlies for ABG had been uniformly good since the buyout. A good part of that was because of some sharp cost cutting. In fact, that performance had earned Brandt’s successor a nice promotion. If Rosen was correct, the cost cutting had largely come at the expense of the company’s future. Everything about the meeting with Rosen made Brandt believe he had been telling the truth.

Deciding it was best not to mention the situation to anyone in the company until he had some outside opinions, Brandt first contacted the consulting firm that had brokered the buyout. The project leader, a Ms. Keller, was still there and agreed to talk to him.

“Ms. Keller, feel free to put this call on the clock.”

“Let me hear what you are calling about first.”

“Good. Drew Rosen has resigned. How serious a problem is that for the company?”

“I think I had better spend a couple of days there before I try to answer that. Do you think it will be possible to talk to Drew?”

“I believe he will be interested. I will tell you why when you are here. Can it be soon?”

“The first of next week. I’ll fly out Sunday evening.”

Willard was still trying to get control of his roiling emotions after the call to Gretchen when his secretary told him Drew was on the phone.

“Mr Brandt,” Drew started, “I think it would be good for you to talk to a woman named Carole Gruden. She retired as a stock researcher. Her personal portfolio averaged double the best mutual funds and seems to be doing even better now. She compiled for me some very telling notes on successful and failed medical technology firms. Hers was the final evidence that convinced me to leave the sinking ship.” Willard had eagerly taken Carole’s contact information and arranged to meet her for dinner that very night.

Willard made sure to be early at the restaurant. He had never been one for late grand entrances. When the Maitre d’ escorted an elegantly dressed woman toward his table, he thought as he stood that she must really be good to have retired so young. He was forty-nine and had become an exercise and nutrition fanatic after a health scare at only forty-two. He pegged the woman at approximately his age.

After introductions, Carole looked quizzically at him when he ordered a nonalcoholic drink. “Been that route,” Willard explained. “Overwork and no input control cost me a marriage and very nearly my life. Too bad it took that to change my habits, but I won’t let it happen again. Also, if what Rosen told me about the notes you have is true, one drink might make me unable to turn down several others.”

Carole nodded and handed him a folder. They put it aside for the salad and entree, but spent every other possible minute looking at what she had assembled. “Rosen told me one other thing,” Willard said at a pause. “He said his former partner refused to stay because our corporation had no other medical experience. He claimed no medical technology company had ever lasted long in that situation.”

“I did not compile any specific notes on that. I was focused on pure research investment,” Carole explained. “I can tell that I did well shorting at least three companies for that reason, one within just the last six months.”

“Since I was put into the GM job thinking ABG was just like any other company, I can see that happening. Despite his obvious anger at what has happened, Rosen was surprisingly eager to give me information to protect myself. Why do you think he did not resign long ago?”

Carole pondered a moment over what she should say. “Most organizations are notorious for using criteria for advancement that are only loosely related to the organization’s success. Public corporations with their short-term profit focus are the worst, except for government. Too many executives fail to see the difference between an assembly line worker and a beyond MENSA scientist who affects the welfare of humanity. Neither has the ‘presence’ to join the management club. You cannot honestly deny that it is more of a club than a true meritocracy.

“For Drew Rosen, MENSA is not worth joining because the entrance requirement it too low.” Willard’s eyes widened at that. “But until a group of my friends started working with him, he was too ... I guess detached is the word, to think about political things. It took years of disrespect and humiliation to bring him to the point where he knew he had to change.”

“Most people could take an awful lot of humiliation for what ABG paid him,” Willard retorted.

“True, and that certainly kept him from acting sooner. The truth is, Willard, Drew has enough to maintain his current lifestyle forever and set his kids up very well when he dies. But he knows what he can do improves people’s lives and he can’t just sit back and clip coupons. And like all males, he has a competitive streak that hates to see his inferiors move past him in any way.”

“So, I guess you know him very well and whatever you and your friends have done has definitely worked. What do you think I should do?” Willard surprised himself by asking that question. Carole just seemed so knowledgable and composed he instinctively valued her input.

“From what little Drew told me, you are taking steps to keep from getting hung for ABG’s collapse. I guess you have to decide whether or not to go hard after your predecessor who I understand was promoted for his ‘success’ at ABG. Sad to say, even if you keep from catching the blame, corporations are very guilty of ‘shooting the messenger’.”

“DAMN! You’re telling I am at least dead-ended either way.”

“Willard, I am shooting from the hip. I don’t have statistics to back that,” Carole cautioned.

“But you have money in the bank from using those opinions to buy and sell. That’s better than statistics,” he countered.

“Here’s an idea, Willard. Why not see if you can work with Drew and the investors and become President of the new/old ABG. I sense you are more than willing to learn what really works in a business and manage according to that. Drew believes they can pull the original head of the company from retirement, but you could be a better alternative. Bring Craig in as a consultant.”

“But doing that while still the GM would be unethical.”

“Good. I’m glad to hear you say that. You’d have to take a gamble. When you were certain the investors were lined up and you would have the position, tell corporate what you plan. You might have to resign then, or they might want you to shepherd the sale.

“Just so you know, my friends and I will be putting significant money into the company, but if I can work it, the main funding will come from the Magnuson foundation.”

“Magnuson! Carole, it is unfair to dangle that incentive. I would love to be somewhere in that organization!”

“Really? What appeals to you most?”

“Hmmm. I don’t want to sound like a do-gooder or anything. The way he has balanced benevolence and profitability makes most corporations seem as bloodthirsty as the general public thinks we are.”

“So you watched them pretty closely?”

“When I moved to town, I immediately got into some extension classes at Addison. Magnuson is like the patron saint of the business school there.”

“So staying in town would appeal to you?”

“Very much so.”

Monday morning after Brandt and the consultant had agreed on ‘Gretchen’ and ‘Willard’, they got down to business. Gretchen first asked to look at all of the scientific personnel and their current assignments. She then asked for a list of recent patents. That was finished by mid-afternoon and she proceeded to add to Brandt’s sense of foreboding.

“Did you know that a retention agreement from either Rosen or his friend Peter Walker were mandatory conditions for the sale?” She asked.

“Rosen told me that. I did not know it before.”

“I will know more when I talk to him, but it appears the critical value of Rosen to the company was thrown away in the first two years. He was no longer allowed or encouraged to do what made him valuable.”

“So, you found this out from other employees?”

“Yes. It is no secret among the staff.”

Brandt wiped his brow. It was his screw up for not learning that fact in his first week. Proper utilization of people resources had always been his strong suit. Just Rosen’s huge salary should have been enough reason to investigate.

“Why do you think he did not leave as soon as his retention contract ended?” Carole had already talked about that, but verification would be good.

“I will ask him that,” Gretchen replied. “We got to be friends during the negotiations. It appears he was handled stupidly by management.”

“That is why you are here. I want to expose any danger before it gets blamed on me,” Brandt explained.

“I am meeting with Drew for an early dinner. Tomorrow, let’s try to come up with a course of action.”

“You actually told him you would try to buy them out,” Gretchen was totally shocked that the Drew she had worked with would even think of such an action.

“Especially since you are here,” Drew told her, “I believe Brandt is going to stir up some concern at the corporation. I would really like to have a clean, easy out for them. They might just take a low offer in their panic.”

“Would you be the president?”

“What would be the fun of that?” Drew quipped. “No. I almost have our original founder convinced to come back as an employee for a couple of years. I will do research. Period.”

“It won’t be that simple. You will end up in a key decision making role whether you want it or not,” Gretchen warned.

“But working with Craig again, he will try to hand me yes/no or how much decisions and let me get back to work,” Drew insisted.

“I’m pretty sure I understand, but tell me why you quit.” Drew went through his reasons.

“What if the buy back doesn’t happen?”

“There is serious interest at Addison.”

“You’ve already talked to them? I don’t mean to offend you, Drew, but your aggressiveness surprises me. What happened over the last five years? It must be recent or you would not have put up with what the company did to you.” Drew tried to describe his purposeful transformation without getting into details. Gretchen let it go.

“You know, you should have been out of there the day your contract expired. In fact, you probably could have left because they broke the contract.”

“I suspect they would have welcomed it after the first year-and-a-half,” Drew agreed. “By that time I had become just a huge cost problem.

“I told Brandt to get the company valued. I know you do that, but I told him to get a second appraisal.”

“That was good thinking, Drew. Because of our role in the buyout, our appraisal may be suspect. I can tell you not to consider offering more than 33%.”

DREW & CAROLE

“Now that’s a startling thought!” Drew exclaimed. Carole had stopped by his home after her dinner with Willard Brandt. “Keep Brandt on as President, huh. He must have impressed you somehow.”

Carole told him about Willard taking classes as soon as he got to town, about his regard for Magnuson, about his realistic view of corporate management, and about his lifestyle. “I just think he is a person who can adapt willingly and well to a new business model and he would make a great public face.”

“Well, Craig never liked that public face part and he was not that great at it,” Drew admitted.

“I suggested to Willard that he could hire Craig as a consultant.”