How two landmark Del. businesses changed hands
Alan Levin, who sold his Happy Harry’s drug store chain to Walgreen’s 10 years ago, gave some free advice to business owners thinking of selling: Don’t talk to potential suitors just to kick the tires.
“Once you make a decision to sell your business, it really takes on a life of its own,” Levin said. “In a small state like Delaware, it will be on the street before you hang up the phone.”
When a reporter called his office about a rumor he was selling long before he had made any decision, Levin’s receptionist quickly spread the word to all his stores: “Alan’s selling.”
Levin and Thomas Harvey, former owner of Harvey and Harvey, shared their experiences selling their businesses at a breakfast forum hosted this month by the Small Business Development Center and Delaware Business Times.
Levin said it’s important to keep a lid on the news until you make a move.
“Your competition will do everything they can to bring you down,” he said.
The impetus to sell
Both Levin and Harvey sold their businesses at crucial junctures. For Levin, the amount insurance companies reimbursed for prescriptions had dropped precipitously. For Harvey, government regulations and organized crime’s moves into Delaware’s trash industry loomed large.
Levin said his gross margins slipped from 35 percent to 15 percent by the time he moved to sell. “We had to make a decision. We were going to have to lay people off or sell to someone who could do it better than we could,” he said.
He was thoroughly prepared before he talked to two national chains whose executives he knew for decades.
“If you don’t know your industry, you’re going to wildly underestimate or overestimate the value of your company,” he said. He advised business owners to seek guidance from the Small Business Development Center or other advisers.
Levin approached Thomas Ryan, CEO of CVS: “He wanted to steal it, and that wasn’t going to happen,” Levin said. “CVS was on another planet, so we didn’t go there.”
He spoke to the Walgreen family: “Walgreen’s agreed with the numbers we presented,” he said.
Each Happy Harry’s employee got a severance package, some as much as four years pay, although most transitioned to Walgreen’s. Levin had gifted employees with company stock earlier – shares equivalent to 30 percent of their salaries – and that stock got a bump up when Walgreen’s bought Happy Harry’s.
Levin got a three-year contract for himself, and he believed his customers and employees would be treated well. “I wanted to live in Delaware, For me, it was important that I could do what I could to help them “¦ At that time, I believed they would perpetuate what we had done. It didn’t turn out that way,” Levin said. “When you turn over the keys, baby, anything can happen.”
At first, Levin called Walgreen’s execs whenever things weren’t done the Happy Harry’s way. Their answers became progressively less solicitous. Within months, they bought out his contract.
“˜Build the enterprise’
Harvey sold the waste-management business his father started with a wagon at age 10, but first he made the business attractive to suitors – including a large customer base, his own truck fleet with trained mechanics, a string of small companies he acquired, and being 23rd in the nation in revenues. “Build the enterprise in the way that makes it attractive,” he said.
Harvey said potential buyers appreciate clear, clean books.
He warned against becoming your buyer’s financier: “Owner-financed sales can work, but they’re fraught with danger.”
Like Levin, Harvey was hired by the company that bought his. It lasted 18 months. He said he thought the new owners would call with questions, but he never got a call. When he asked the new owner why, his response was, “Why the hell should I call you? You’re not my problem.”
The session also focused on the emotional aspects of selling a family business.
Ellen Levin, who had been married to Alan Levin for 23 years when the sale went through, said selling what her in-laws started in 1962 was a grieving process for her. “We’d been married 23 years. Much of my identity was around Happy Harry’s as well,” she said.
She compared it to mourning a loved one: “There’s a Jewish term – sitting shiva. I felt like we were sitting shiva. It was very sad.”
She did manage to joke about it though. On the day her husband signed over the drug store chain to Walgreen’s and got his payment, she had him served with fake divorce papers.
“If you’re going to divorce, do it when he’s 100 percent liquid,” Ellen Levin said laughing.
Before you sell
Levin and Harvey had this advice for owners contemplating a sale:
- Work with the SBDC or your attorney or financial adviser so that you know the market value of your business before you look for a buyer.
- Get organized. Have all your accounts straight.
- Take actions that will protect your customers and your employees. They are also family.
- Build your business into one that has verifiable value.
- Realize that, even if the new owners ask you to stay on, they may not be interested in your opinions.
- When you give potential buyers your information, you must be ready to sell because they are also your competitors.
- Once you step into the market, rumors may start and it may be difficult to pull back on your decision to sell.