Selling the Business – A Kabbalistic Process
(For an introduction to the principles of Kabbalah please click here)
Everything in the physical world goes through the same creative process in order to arrive at the point of manifestation. This process is described by the qualities of the ten Sefirot of the Tree of Life and will appear in different forms according to the nature of the project.
The sequence in which we experience these qualities is shown by what is known as the Lightning Flash of Creation as it proceeds from Keter to Malkut through the world of Formation (Yetzirah) into the physical world of Assiyah. (Figure 1)
At the first point, the Keter of Yetzirah, there is a correspondence with the highest world of Azilut where everything is held in potential and also with the heavenly world of Beriah where there exists the idea of the thing to be created. This place is known as the place where the three higher worlds meet and is shown on Figure 2.
This essence filters through the crown (Keter) of Yetzirah and is the first point of the lightning flash in the world of Formation. It proceeds first to the active column and to Hokhmah where the idea for the project may arise in an instant.
Figure 1: The Lightning Flash of Creation
The flash moves across the Tree to Binah at the head of the passive column where the implications of the idea are understood. Once these consequences have been digested there is a critical point where the project may be abandoned for one reason or another.
If the decision is made to proceed, then the flash crosses the abyss of Da’at and finds itself once more on the active column. This time it is at the Sefirah of Hesed where the project is expanded and developed.
Not all these ideas will be practical or desirable and so the unworkable elements are removed when the flash crosses to Gevurah which refines and removes the dross.
After this stage has been completed the lightning flash reaches Tiferet where the essence of the thing to be created is clearly known. The Tiferet of Yetzirah corresponds to the Keter of Assiyah and also to the Malkut of Beriah. This is Heaven on earth – the place where the three lower worlds meet (Figure 2). The beauty of heaven is ready to manifest on earth.
When the lightning flash moves on to Netzach – which is directly connected to Malkut - the process of initiating the physical manifestation begins. However, this lower level of the active pillar must be balanced by the lightning flash going to Hod at the bottom of the passive pillar where adjustments are made – and adjustments are always made.
Figure 2: The Four Worlds of Jacob’s Ladder showing the correspondences at the places of the three higher worlds and the three lower worlds meet
Each place on the central column represents an interval in the process of creation. At Da’at there is a pause to consider whether or not to go ahead and develop the project, at Tiferet there is a recognition that the essence of the project is known and at Yesod there is a pause for a final assessment - the launch of the rocket may be aborted before the countdown reaches zero.
Having this model in mind can be extremely useful in working our way through a project. If we know that each stage must be experienced then we can allow that to happen more easily rather than trying to bypass it either through impatience or because of a personal aversion to its particular nature.
As an example I set out the actual process of selling a business in which I was involved some years ago.
The Financial Services firm of which I was chairman (let’s call it “GBI”) was an LLP – a Limited Liability Partnership. This had been running for five years and had been designed so that everybody working in the business could also own a share of it.
The firm specialised in providing advice to clients who wished to invest according to non-financial as well as financial criteria such as not placing their money in arms or tobacco companies and intentionally investing in companies which made environmentally positive products. The fifteen members of the LLP – in varying degrees – all had a commitment to these values.
GBI first traded in 1985 and had taken on its present form when the previous owner retired. The LLP which was formed at this point had been intended to run indefinitely but, as a number of the older partners also approached retirement, the younger partners struggled to find the necessary money to buy their shares. Various attempts to recruit more consultants with the funds to purchase equity in the business were unsuccessful as were efforts to raise additional loan finance.
The idea of selling the business to a third party was always hovering in the background but without any form – this was the Keter of the business sale.
On 2 August 2013 I received a random telephone call from a broker who was looking for businesses to buy on behalf of various clients although he was not specifically targeting our sector. After a few minutes I said I was not really interested in pursuing this as we would only be able to sell to a company which was focussed on ethical and environmental investment. He did, he then said, have such a company on his books and they had already made a successful acquisition of a firm such as ours a few years earlier.
A meeting was arranged with the Chief Executive of the prospective acquirer – let’s call it “CWM” - for ten days hence where we found an instant rapport and agreed to explore the matter further.
The meeting (of one hour duration) was a “Hokhmah moment – or hour” when it became apparent that there was an idea worth pursuing which would satisfy all parties. It could also be said that it was what is known as the Hand of Heaven answering a real need to resolve difficult situations for both the LLP and its individual members.
There was an exchange of correspondence between myself and Sam, the chairman of CWM, over the next four weeks at
Figure 3: The Ten Stages of Selling a Business set on the Tree of Life
the end of which period we had evolved a basic formula for a purchase and sale of the LLP.
This structure only represented the agreement between the heads of the two entities involved - there was a long way to go yet. We had now taken the project to Binah – the place where the original idea or concept had been given a structure and where it was realised the subsequent processes would have to be experienced before the change of ownership of the business was complete.
The next stage was a meeting between the four members who formed the governing executive of GBI and this was held on 25 September. Sam also attended the meeting briefly to meet the three other members of the Board apart from myself.
The meeting continued for several hours as opinions divided. The two members who were nearer to retirement saw a sale of the business as the most sensible way forward while the two younger members were concerned about the degree of control which they would lose for the remaining twenty years of their careers if the business were sold.
Such disagreements are common in a board room environment and, since there were an even number of members with the constitution not allowing the chairman a casting vote, it seemed likely that the whole project might come to nothing. This was Da’at – a critical point where proposals become still born or move on to the next phase of expansion. After much debate it was eventually agreed that we should move forward with the proposal.
Figure 4: From phone call to signed acceptance – the critical stages of the sale of a business with their Sefirotic correspondences set on the Tree of Life
Within two days the principle of Hesed was enacted as news of the offer (previously known only to members of the Board) was enthusiastically extended to all the remaining members of GBI explaining that acceptance of the offer by CWM would ensure the smooth continuance of our business.
While most members treated the offer with cautious agreement there were, inevitably, various aspects of the proposal which were not acceptable to some of the members and amendments were requested. This was the process of Gevurah at work, the refining of the basic proposal which had been made.
This conversation, which was conducted personally between members as well as by email and telephone, continued for the month of October until 1 November. This was the day when a meeting had been called where all members of GBI would attend, giving Sam the opportunity to present the details of the offer in person.
By the time the meeting commenced many of the contentious points had been aired and amendments sought and found in most cases. The main issues which were left to be resolved concerned the mixture of cash and shares which would be offered to each partner and the employment status of the members under the new regime.
These issues were at the heart of the proposed deal. If the offer were rejected by GBI then it would have to continue looking for another solution to the problem of its capital structure. However, if the offer from CWM were accepted, then the members of GBI would no longer have control of the business.
Business ventures are (hopefully) a more refined version of warfare. In this case we we were seking the Holy Grail of co-operation and agreement between all the partners – the modern counterparts of the Knights of the Round Table.
Business vetnures are (hopefully) a more refined version of warfare. In this case we we were seking the Holy Grail of co-operation and agreement between all the partners – the modern counterparts of the Knights of the Round Table.
We were discussing the soul of the business and opinions were voiced on both sides of the argument. This meeting represented the soul triad of GBI on the Tree of Life (Hesed-Gevurah-Tiferet) where the collective free will of the membership could be exercised. Would the members vote in favour of the offer or against it?
As chairman of the meeting (Tiferet) my job was to maintain the balance between those in favour of change
(Hesed) and those who opposed the sale (Gevurah).
By the end of the day we had managed to find compromises to the previously unresolved issues and were ready to have the outcome of our discussion distilled into a document known as the “Heads of Agreement.” This was the Tiferet of the process. The principles of a deal had been agreed by the membership rather than just the Board although the detail had still to be filled in.
A vote taken after the meeting saw only one member (holding just over 9% of the shares) oppose the deal although a further two or three voted in favour of the deal with reservations considering that to proceed was the “least bad option.”
There was another manifestation of Gevurah to be undergone in this situation and this was the process known as due diligence. This consists of allowing the prospective purchaser to have access to the books and records of the seller and to request an adjustment of the purchase price based on any material factors which come to light during the examination.
This stage took nearly two months due in part to the interruption of business by the winter holidays as well as the complexity of the business. It was on 25 January 2014 that due diligence was completed and the essence – Tiferet – of the sale of the business was finally reached.
While a verbal agreement does have legal status, it is not possible for all the aspects of such a complicated agreement as the sale of a financial services business to be dealt with verbally. There needs to be a written contract so that all eventualities are covered – or at least as many as the principle parties and the lawyers can envisage.
The idea of a sale corresponded to Hokhmah, the expansion of the idea to all members of GBI signified Hesed while the physical completion of the transaction in the form of a written contract signed by all parties corresponded to Netzach which is directly connected to Malkut, the kingdom, where the process is completed.
It took another month for the lawyers to send a draft contract and, when it arrived on 27 February, the reason for the four week delay was clear. The document ran to more than 100 pages in length in addition to the various side agreements such as employment contracts and taxation warranties which would form part of the final agreement.
This was, indeed, a dramatic demonstration of the physical aspect of the process and of the considerable force which had been used to initiate a new cycle. The tone of the lawyers struck us as particularly combative as though they were suing for compensation rather than creating a document to give birth to a new commercial entity. Perhaps that is the default position of lawyers or perhaps we were just biased as we saw our own legal team as a model of courtesy and good manners.
Setting a deadline is an invaluable tool to ensure negotiations do not drift endlessly.
To counter the force of Netzach our legal team got to work on the adjustments which they saw as necessary to adhere to the principles of the agreement which had been reached. From a Kabbalistic viewpoint these adjustments were not just a commercial requirement of our lawyers but also what was needed to maintain the Tree of the Sale in equilibrium.
When the Treaty of Versailles was signed in the wake of the First World War it was commonly held to heavily biased in favour of the victorious Allies engendering the resentment which created the atmosphere to allow the Second World War just 20 years later. This can happen when an agreement is weighted too heavily in favour of one party.
The back and forth between the lawyers lasted for two months until 21 May - just ten days away from 31 May which Sam and I had agreed should be our target for completion of the deal.
We had reached the point of Yesod where the final contracts had been prepared and were ready for signature. A series of (sometimes heated) discussions ensued between members of GBI regarding the dates at which each would receive the cash due to them over the next three years as the proceeds from CWM were to be received in stages. Various bargains and deals were done to avert the very real threat of signatures to the contract being withheld.
This aspect was typical of Yesod which corresponds to the ego in psychological terms where concern is only for one’s own interests and no consideration is taken of the bigger picture. Yesod is the final interval in the process of the Lightning Flash’s journey to physical manifestation and is illustrated beautifully by British entrepreneur Lord Alan Sugar in his autobiography, “What You See Is What You Get:”
“When you get down to the last contractual stage of any deal there are always a few showstoppers.” (p.473).
We held our breath and the contracts were all returned to our office with the necessary signatures.
The pieces of paper on which ink had been formed into characters were exchanged between the lawyers acting for both parties and had full legal effect on 30 May 2014 which was the last working day of the month. As a result of this, money was transferred from buyer to seller and control of the business passed from seller to buyer. The possibility of a sale which had resided at Keter for three or four years had become reality at Malkut.
© Jonathon Clark 2020