This month, we sat down with Jim Cumbee JD, MBA, chair of the M&A Source Communications Committee for 2020. Jim is the owner of Tennessee Valley Group, an M&A advisory business for companies with revenue of $5M to $40M. He is also a Tennessee Supreme Court listed General Civil Mediator. In addition to being an attorney, transition mediator and business broker he has also been a buyer, seller, and entrepreneur.
Tell us about your pre-M&A career and how it led you to do this work?
I have been in the business of strategic capital allocation for 30+ years. At Disney, I was involved in the business planning that led to the launch of several new businesses, including the Disney Institute and Disney’s Celebration. While I loved that work and the company, I wanted to be an entrepreneur, so I resigned from Disney when I bought a radio business in Nashville. I grew the business through several acquisitions, including one company that was in bankruptcy and sold the consolidated business four years later to a publicly-traded company. For the next nine years, I led M&A activity for that company. During that time as a corporate buyer, I evaluated scores of businesses and saw many situations where business owners weren’t well represented. That led me to conclude that business brokerage was broken, so I started my firm in 2008.
What personal characteristics and strengths have supported your success in this industry?
You have to bring to the table a mix of confidence seasoned with humility and doggedness, yet knowing when to be flexible. It also requires an ability to work hard while understanding when to sit back and wait. This was developed through years working with buyers and sellers of all types. Sophisticated private equity, demanding corporate buyers, and aggressive individuals ….I’ve seen them all, and nothing intimidates me.
What is your greatest M&A accomplishment?
Selling a business after the client died the day we got an LOI. The buyer had just gotten out of federal prison for bank fraud. And oh yes, we got a bank loan to complete the deal. Long story.
About the majority of your engagements, do you work as a team or do you handle things on your own?
I work on my own because it affords me more flexibility, and allows me to focus on my clients, not personnel management.
Do you just do M&A or do you provide other services – valuations, consulting, etc.? I have done a few valuations when the situation does not require a certified appraisal. But, if I see the valuation potentially leading to a court dispute (i.e., divorce, estate dispute, etc.), I will encourage the client to use a certified appraiser. I do a fair amount of consulting related to ownership transitions, such as intergenerational transfers, partners needing to dissolve, or owners passing equity to their employees. I do this work as a mediator, meaning I work with all the parties as opposed to being an advocate for one party over another.
What is the biggest mistake you have made when working on a deal?
I recently had a deal blow up two hours after all the documents were signed but before the wire had been sent. My client, the seller, had been expressing remorse about selling and dissatisfaction with the buyer. I passed it off as “normal” seller’s remorse because we were getting an all cash-at-close deal for more than our initial selling price. In retrospect, I should have been more sensitive to what he was telling me. I think I could have saved it had I addressed his concerns earlier.
What are the three most important qualities that you think a good M&A advisor needs to have?
I can’t imagine being successful in this work if you didn’t have a strong facility for numbers, the emotional and financial wherewithal to handle the ups and downs of the deal cycle, and an innate curiosity about business and people. And one other thing, you can be a jerk and last a while, but to make this a career, you need to be a genuinely nice person who cares about people.
What is the most interesting deal that you are working on today?
I have a client that manufactures locking devices for jails and prisons (the “detention industry”). I always assumed a lock was a lock, but I’ve learned there’s a wide variety of needs given types of detention facilities and inmates housed therein.
How long have you been an M&A Source member and what do you get out of your membership?
I joined and started going to M&A Source events in about 2015. I have met many sharp people from whom I have learned much. I have attended several workshops, which are always provocative and helpful. I was in the first CM&AP cohort at Kennesaw State, and I often find myself using things I learned in those sessions.
As a seasoned M&A advisor, what changes and trends do you see on the horizon that will impact on M&A?
There will be more quality competition for lower middle market engagements. There will be more search fund-style investors. There will be more technology tools to facilitate interaction with strategic and financial buyers.
What advice would you give to new people entering the profession?
Don’t start if you don’t have the financial and emotional strength to survive for two years without income. Don’t ever give a business owner advice that puts your financial interest ahead of the owner.
Jim, you are an attorney and mediator. How do those experiences impact your work as a transaction advisor?
I do not handle the legal work associated with my client’s transactions. My engagement agreement is very clear that legal work is not in my scope of work. But, I love facilitating the process between each side’s legal counsel and diving in with ideas or answers as might be necessary. It’s also fair to say I get a higher degree of respect from other professionals just because I have those initials after my name. The mindset and training of a mediator is to be a good listener and work with all parties to drive toward a common solution. This win-win mindset has morphed for me from being an approach to problem-solving to being the lens through which I see almost every situation I am engaged to resolve.
Please tell us something about yourself that has nothing to do with your M&A work.
When I started at Disney, I went through an executive training program, which included working in the parks. One day I was Goofy in EPCOT. It was July, and I’ve never been so hot in all my life. It made me appreciate how difficult the character job is. Moreover, when you’re looking at the guest through the character’s eyes, you get a different sense of how emotionally attached the guest is to the character. You don’t get this connection when you are standing nearby watching a character interact with a guest, but looking out from the eyes of the character, it’s a different thing. I know, it sounds weird, but it’s true, and it’s an awesome thing to experience.