Barnett, Samuel Grenthaler’s best friend and business partner, stepped into the role of CEO. While Tom proved to be a visionary leader and a superb manager, he viewed himself as a caretaker of his friend’s company, and he began grooming Sara to take over. During her vacations from college, she worked in a variety of roles at Grenthaler, and after college, she spent two years at a management consulting firm before enrolling at Harvard Business School. She’d spent the previous summer as an intern at Winslow, Brown, learning the essentials of corporate finance to supplement her formal business education before returning to HBS for her second and final year.
Sara had been assigned to one of my deal teams that summer, and the two of us had hit it off immediately. We had certain things in common—including a love of bad teen movies from the eighties. I loaned her my copy of Valley Girl, and she returned the favor by introducing me to Tuff Turf. But while we had forged a close friendship and our conversation frequently ventured beyond company affairs, I still was surprised that she would want to see me on the eve of Tom’s memorial service. I doubted that I would be among the first people she’d turn to at a time of personal grief.
Seconds after a waitress delivered my glass of wine, I saw Sara framed in the doorway across the room and raised my arm in greeting. A tall woman, she had the slight slouch of someone who was both self-conscious of her height and reluctant to attract notice. But she was striking, and not a few people turned to watch as she made her way through the maze of tables to where I was sitting. She had her mother’s fine-boned features and her father’s piercing dark eyes and luxuriant black hair, and the unusual combination worked.
I rose from the table and gave her a hug. As she settled into the chair across from me, I noticed with concern how thin she’d become and how tired she looked despite the warmth of her smile. She had dark circles under her eyes, and the charcoal-gray of her sweater emphasized her pallor.
I repeated the condolences I’d offered when we’d spoken by phone, and we made small talk about the details of the next day’s memorial service until after we’d ordered. As soon as the waitress departed, we settled down to business.
“I’m glad that you could make it tonight,” Sara began, fidgeting with her place setting in an uncharacteristic display of nerves.
“Of course,” I reassured her. “I know that Tom’s death must be hard for you.”
“It is,” she admitted. “My grandparents are wonderful, and I’m so lucky to have them, but Tom was like a second father to me. And it was quite a shock, too. After he had his first heart attack a couple of years ago, he went on a total health kick. He’d been exercising and eating right and everything. He told me how pleased the doctor was with his blood pressure and cholesterol. And he’d lost a ton of weight.”
“He looked terrific the last time I saw him.” I’d almost been inspired to go on a health kick, too, but a good dose of Diet Coke and chocolate had quickly banished that thought.
She paused, and I could tell she was choosing her next words carefully. “I need your advice.”
“Whatever I can do,” I told her.
“I had breakfast with Tom last Thursday morning, the day before he died. He was worried—very worried—about something at the company.”
“I was scheduled to speak to him on Friday afternoon, but I didn’t know what it was about. He made the appointment with my secretary.”
My dealings with Grenthaler Media had been fairly limited of late. I’d assisted with the sale of a set of trade magazines the previous year, but it hadn’t been a particularly complex transaction, and I’d shepherded it to closing with no major problems. I’d appreciated that Tom had trusted Nancy Sloan and her faith in my ability to handle the deal without more senior supervision from Winslow, Brown. Many of our clients felt that they deserved to see a little more gray hair on the bankers who would be collecting hefty fees from the transactions they handled.
“I know. He thought you might be able to help.”
“Help with what?”
“Tom thought that someone might be buying up our stock in the market. He’d noticed the price had been up a bit—even though there had been no recent announcements that would explain any movement.”
I thought for a moment before responding. “I noticed the price increase. But the market as a whole has been pretty volatile. And even if Grenthaler hasn’t made any announcements, announcements by competitors or suppliers or a whole host of other factors could account for the uptick.” When a company announced shifts in strategy or operations, it could alter the public’s expectation for future performance, thus causing swings in the stock price. Moves by a competitor or a supplier could affect the price as well.
“I told Tom that it probably didn’t mean anything. But he was also concerned about the volume of trading. He thought it was unusually high.”
“Given that less than half of Grenthaler’s stock trades publicly, even a small bit of trading looks like a major increase in the number of shares changing hands,” I replied.
Sara controlled thirty-one percent and Tom Barnett controlled twenty percent of Grenthaler’s four million shares outstanding. Only the remaining forty-nine percent—about two million shares—traded publicly. Each share was worth approximately $250, which valued the company as a whole at one billion dollars. The relatively small number of publicly traded shares meant that only an incremental few thousand shares had to change hands to create a spike in the usual trading volume.
Sara nodded in agreement. “I know that it’s hard to draw conclusions from the trading volume, but Tom was still concerned.”
Now my curiosity was officially piqued. “That somebody might launch a takeover?”
“No, it wasn’t that. I mean, nobody could gain control of the company without buying shares from either me or Tom. He was just worried about someone else becoming a significant power in the company—even with a minority stake somebody can still start changing the composition of the board and influencing company strategy.”
“That would have to be a pretty significant minority stake,” I pointed out. “The investor would need to have at least twenty or twenty-five percent of the company to exert that sort of influence, and he would have to make a public disclosure to the Securities and Exchange Commission regarding his intentions once he reached five percent. Nobody’s reached that threshold.” But even as I was saying this, I began to wonder if Tom had been right to be concerned.
“That’s true. But it still makes me nervous. Especially now that Tom is dead.”
I had the feeling I knew where she was heading. “Would Barbara sell Tom’s shares?” Barbara was Tom Barnett’s widow.
“I don’t think so, but I’m not sure. When they read Tom’s will on Monday, she seemed surprised that he had only left her half his shares and that the other half reverted back to me. I thought she already knew that was the arrangement Tom made with my father years ago, before the company went public. But she’s always wanted Adam to be more involved in the business, and maybe she was hoping that if she had more control she could make that happen.” Tom had adopted Adam, Barbara’s son from her first marriage, when he married Barbara.
“What do you think?”
“I think that Tom didn’t want Adam to work at Grenthaler. He and my father agreed that I would take it over one day, and he didn’t think Adam
