Jay Sachetti joined Jeff O’Brien, partner at Husch Blackwell and Dyanne Ross-Hanson, president of Exit Planning Strategies talked about the market for mergers and acquisitions, exit planning opportunities for companies that don’t end up for sale and how companies can maximize their eventual sale price during an early October panel at the first Upsize on Tap event at Summit Brewing Co. in St. Paul.
When the state Legislature passed a law requiring employers to provide paid leave and safe time for employees, Justin Bieganek started hearing differing details from friends, colleagues and peers.
Mike Carrel, who was CEO and president of Zamba Solutions Corp. in Minneapolis, closed Dec. 29 its $6-million sale to Technology Solutions Co. of Chicago. The success ended a ride at a company that “should have been dead 40 times over,” as a lead investor once put it. Carrel tells why he had to see it through.
“Zamba used to be Racotek, founded in 1989. They made a wireless device that allows you to do field service. They went public in ’93. They’d raised $39 million in private financing and $29 million in public, and did it on $800,000 in revenue.
They went out and spent it. It was a missionary sell. Wireless was down on the list of priorities for CIOs and CFOs, but it was going to be the hot new thing.
I joined in June of 1997. The company was a hundred people; they had a huge R&D lab. Our cash was $70 million, but that was down to $6 million. We were losing $2 1/2 million a quarter. We were going out of business.
We had made the decision to take the staff down to 40 employees and close the lab. We had been a wireless software company, and we had services to support that. For example, at Hertz, for you to rent the car, Racotek/Zamba made the device that the guy in the lot uses to tell you your car is ready.
By ’97-98 we focused on field service. You could make money by servicing the installations in the field. We purposely said we’ll go really narrow and grow from there. When we got in we found this big area called customer relationship management.
In ’98 we bought a company on the West Coast, which doubled us to 80 or 90 people, and gave us a presence in Boston and the Silicon Valley.
Also, we were raising money for NextNet wireless, and raised $8 million from VCs. We retained part of the company; it was purely an idea, a patent, obtained by some people from Racotek.
In September ’98 I became CFO. The guy who was running services and I started taking it forward. We pointed the sail in the right direction. We grew from almost no revenue in ’97 to in ’99 $29 million, and $42.5 million in 2000.
Meanwhile our stock didn’t move at all. I was trying to get research coverage, but there were millions of companies at the time going public, and we were behind them. In December of ’99 we got research coverage, and the stock went from $2 to $20 overnight.
Then the market tanked in 2000, and our stock price went down and down. Fortunately for us, we kept doing well. We hired a guy from KPMG to take us to the next level. We were going to grow the business to take us to $40 million and then to $200 million.
2001 was the worst year for IT consulting services ever. It hit and it hit fast. It was tough for the next 21 months.
One thing we always did, we always provided incredible services to our customers. . . A lot of the businesses that were like us disappeared into bankruptcy.
In 2002 NextNet wound up having some success. I was negotiating out of space, negotiating with creditors and vendors. We needed to raise some money. I was out raising money by selling NextNet shares.
It’s all about a mental mindset. In mid-2002 I was so busy raising all that money, $9 million, and dealing with lawyers, some who were saying ‘go bankrupt. It’s for the best for all of you.’
I kept saying wait a second. I know we can get there. You have fiduciary duty, to your shareholders and your creditors. I felt confident we were going to make it.
I recruited back Norm Smith, the first Racotek turnaround guy. I got done raising all of our money, from NextNet shares, $9 million, plus a line of credit for $5 million, plus $4- to $5 million in private placements. June of 2002 we went off Nasdaq and went over the counter.
We got the business back to profitability by Q1 of 2003, then again in Q2. We started thinking about, in the summer of ‘03, selling our company. We signed up a banker in October. I started helping with NextNet, and they were purchased in March of ‘04.
I had a bunch of parties interested in Zamba. In July they made me CEO. I got a call from the chairman of TSC, Technology Solutions, a wonderful man, in his 70s. We just hit it off. He liked my youth and energy. Within three weeks from the day I first went there, we did the deal. It was a sprint. It is a perfect match.
I’m senior VP of strategy and development now. My new role is evolving.
Why did I stay the whole time? I’m 34. I’m here to support the team. When I was 27, the chairman of Racotek after a year’s worth of work gave me an opportunity which most 27-year-olds don’t get: to be CFO. They took a risk. I’m loyal to people who take a risk on me.
I believe in not letting people down. I respect people that put money in. I’m a loyal guy. That’s a trait to a fault with me. The chairman put $6 million in, and he doesn’t have $6 million to show for it, more like $1 million. The other thing, I didn’t want something going down on my watch.
I owned a bunch of stock in Zamba. I never sold a share of the stock. None of the executive team sold. It would send a bad message. And we were naïve. We were in blackout periods when it was $20, but there were times when I could have sold. I’ll be smart enough in the future. Now I’ve got equity in the new company.
I didn’t get fabulously wealthy. I have a great life. I have a great family. We all wish we had more money in the bank. Would I like the money? Sure. But I’m doing very well.
As tough as it is, when you go through hell and you make it to a place that’s really good, it just feels good. It was a great felling, a great accomplishment. While I didn’t make a huge home run in terms of money, I’ve got friends for life.
I feel the loyalty you show to others gets shown back to you over a lifetime.”
— Interview by Beth Ewen
[contact] Mike Carrel, Technology Solutions Co.: 612.839.2902; in**@*****ol.com; www.techsol.com
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