Chapter 5

The following weeks at work were extremely strange to say the least. Robin appeared very detached from me which was surprisingly after what we had just shared. Then the strangest thing, at least to me, were the looks I was getting from people on every floor of the building.

That first month, I worked on three different cases mostly just going over financials as I had done for Helen Jameson. In all three instances, I did uncover a few things that were helpful to the case. Nothing as important as the Jameson case, but still helpful. At the end of my first month with the firm, I received my CPA license which was framed and hung in my office along with my professional certificate in accounting and my master’s certificate in account.

At the start of my second month with the firm, I was called to Richard Butler’s office for a meeting. Jeremy Land had a long time friend pass away leaving a large business to two daughters, who apparently were overwhelmed. They wanted to sell the business but had no idea of what it was worth. Jeremy wanted me to do an assessment and possibly help the daughters with the act of sale.

I agreed to do everything I possibly could and Jeremy informed me that all of the firm’s files on the company would be in my office in the morning. I went back down to my office and finished up the day. The next morning, I arrived early and sure enough my office was full of file boxes. They went back nine years, so I put the older ones in the corner and tackled just the last five years.

I started separating the files as best as I could finding the financial statements for each year. The Gadden and Associates Company consisted of three smaller companies. The first and largest was Gadden Machine Works Inc., which was a large machine shop doing industrial repair. Second was Miller Hardware, a warehouse not far from the machine shop. Third was Gadden Properties, which leased all current real estate back to the other two companies. I compiled all the financials for all five years and sorted them out. Then basically, I read correspondence between Butler, Land and Reyes and Milton Gadden.

I was putting most of the correspondence back in the file box when a small pocket notebook fell out of one of the files. I picked it up and opened it scanning several pages. Something got my eye, so I sat in my chair and began reading the notes one page at a time. Apparently, a year or so before his death, Milton Gadden had talked to three of his employee’s about buying him out of the business. They were notations about possible price and what shares employees would receive. On one page, it appeared that Mr. Gadden would retain the property and rent the buildings back to the new owners.

I had Terri Clark set up a meeting at my office with three perspective employees the following week on a Wednesday afternoon. It was then I first met Charlie Miller, Tim Saxon and Derrick Miller. Charlie and Derrick were brothers who had worked for Gadden Machine Works for over twenty years. Tim Saxon was the job planner and purchasing agent and had been there for eighteen years as well. After speaking with them about the notes I had found in Milton Gadden’s files it seemed like he was already trying to put together a sale but then became ill. In essence, Charlie, Tim and Derrick would pay a monthly notes for the business and well as rent on the two buildings. The family was to retain Gadden Properties where one of his daughters worked. All three men were still interested in buying the business if the price was right. They were very nervous about an outsider buying the company and perhaps shaking things up.

Since, I already had perspective buyers it seemed foolish to put the company on the market at this time. I evaluated the previous five years of returns that were available first. Milton Gadden took quite a large sum of money out of the company in the way of salary and bonuses. After looking at the present accounts payable and accounts receivable they was a surplus of about seven hundred and eighty thousand dollars.

I started to put together a package for the three men to buy the company. After doing an analysis, I came up with a value of four million two hundred thousand for both the machine shop and hardware business. Milton Gadden took a salary of ten thousand five hundred dollars a month which came to five hundred forty six thousand dollars a year. Not abnormal, his wife was Vice President of the company and was paid three thousand dollars a week as well for a total of one hundred fifty six thousand dollars a year. During the last three years he had taken several bonuses at least once a year with the minimum being seventy five thousand. Both of the Gadden’s cars were owned by the company and insurance was paid through the company. In addition, there were large expenditures on the credit card for meals and other assorted expenses charges through the company.

I calculated that the Gadden’s took close seventy hundred and fifty thousand dollars a year as salary, bonuses and commissions. I started to put together a plan for the three men to buy the business on installments. The key was making sure it was attractive enough to the Gadden family and affordable so the men could keep it running.

I talked to Jennifer Gadden, who ran Gadden Properties. We discussed a monthly fee for the employees to rent both the machine shop and hardware buildings. After coming to some sort of idea what Jennifer felt the market value was, I finalized my idea.

I set up a meeting with the Gadden family and Charlie, Tim and Derrick. The meeting was set for Friday at ten in the morning. I figured it would be a marathon meeting so I asked Jeremy Land if he could set up a lunch for all involved. He agreed and the meeting was set. I asked Robin Woods if she would accompany me to the meeting and she agreed.

Since the night Robin and I had slept together, I had to admit, she was acting different. I’m not sure if perhaps she regretted what we had done. Several days after the encounter, I had asked her to dinner, but she declined. But since I was busy on the Gadden account, I let it be for the time being.

On Friday morning, the conference room was full by the time I arrived with Robin. In attendance were Milton Gadden’s wife, Margaret, both of his daughters Jennifer and Milly along with their husbands. Richard Butler and Jeremy Land were also in attendance as well as our company stenographer. I also had asked someone from the Cattleman’s Bank and Trust to be there. That was the bank that Milton Gadden had used for years and this was his personal banker who I had met with several times.

Robin and I took our seats and I started laying out all of the folders we had brought with us. In my mind, I felt that this would be a defining moment in my early career. I had handled the research on my own and this was all on me. If this went badly, I would definitely have a black eye.

Before we were able to begin, Mrs. Margaret Gadden announced something I was not expecting. Apparently, Milton and Margaret had done very well through the years and had invested wisely. Though not admitting to a monetary figure, Margaret Gadden said she was financially secure for the rest of her life. Therefore, she was willing to sign the company over to her two daughters and allow them to make the sale.

With that said, this completely changed the scenario but since I was already prepared for the sale, I decided to move forward anyway. What I proposed was that Charlie Miller, Tim Saxon and Derrick Miller buy Gadden Machine Works and Gadden Hardware outright. I used the annual salary that Milton Gadden took out yearly as a basis for the installment payments on the business. Doing that, the three new owners would not be adding any expenses to their monthly expenses. They were simply converting Mr. Gadden salary into monthly payments to purchase the businesses.

Since the perspective buyers were willing to lease both buildings for a ten year period, I asked for a slight reduction of the overall cost of the business itself. I listed the proposed selling price of the machine shop and hardware store at three million seven hundred and eighty thousand dollars. There would be no down payment, however the bank would finance the cost of the business. The note on the business would be roughly sixty eight thousand a month to Cattlemen’s Bank and Trust. The Gadden daughter would split the check of three million seven hundred and eighty thousand dollars.

In addition, Gadden Machine Works would pay a nine thousand a month rent and Gadden Hardware would pay thirty five hundred. So the daughters would have another twelve thousand five hundred dollars a month in rent coming in.

By the time I had laid all of this out, Jeremy Land suggested we break for lunch and let everyone talk privately. Robin and I went to the break room and made a small plate and ate. After a hour or so, the meeting was reconvened. The Gadden family attorney said that the family was overall pleased with the proposal but the taxes on a three million plus dollar sale were staggering. He said in speaking for the family, they might be willing to finance the business themselves. That way the daughters would accrue taxes at a much lower rate by spreading the purchase price out over years instead of one lump sum.