Mike Barker: How a 90-Day Pause Added $12 Million to the Sale

The Goal

When a buyer made an offer on House of Cheatham in 2014, owner and former CEO Robert Bell simply thought it was worth more money. His son-in-law, Mike Barker, was the new president and CEO and was still making his mark. And while Barker felt that the offer was strong, Bell wasn’t on board. The offer came and went.

In 1996, Barker started at House of Cheatham, a manufacturer and distributor of hair care products for the Black market, after serving in the Marines and working at UPS for years. At that time, the company generated $7 million in revenue each year but was struggling. Bell had bought the company in 1971, 50 years after its founding — it was his baby, and Barker wanted to see it grow.

When Barker joined the team, he started helping any way he could. He first learned about the warehouse, including its costs and the inventory numbers. He worked to improve productivity, which grew under his watch.

By 2010, Barker had become the company’s leader, and it continued to grow. The company expanded into international markets, and the revenue skyrocketed. The business grew from $7 million in revenue when he joined — working in the warehouse — to $77 million under his leadership.

Seven years after the first offer, in 2021, a deal was on the table again from a different buyer. Bell had passed on, leaving ownership of the company to the family, and Barker was the sole decision-maker.

“I had the responsibility of my family — my kids, my mother-in-law, all of our employees,” Barker says. “I couldn’t guarantee what was going to happen in this world, and too many of our eggs were in one basket.”

Now 62, Barker was ready to sell, but he wanted to get it right. He knew that a successful sale would protect his family and his employees and give House of Cheatham’s shareholders a good return on their investment.

“And we wanted the best return possible,” Barker says.

The Process

When a private equity firm approached Barker with a deal, he wanted to avoid waiting too long. But he also wanted to be sure that the sale of the business went smoothly.

“I put everything on hold for about 90 days,” Barker says. He knew from his time in Vistage that there were things he could do to increase the business’s value and make the M&A process easier.

Barker thought back to what his Vistage Chair, Wade Bradley, had been asking him since he joined in 2016: Are you working in the business or on the business?

Barker used those 90 days to work on the business.

First, he started a quality-of-earnings (QoE) report to verify the income streams. This was essential, he says, because House of Cheatham went from no international sales when he became CEO to doing 40% of its business internationally. While its international business was great, U.S.-based customers are far easier for banks to verify. With the QoE report, Barker showed proof that House of Cheatham’s international business was a legitimate income stream.

Next, Barker undertook an environmental study on the property they owned. A neighboring property had rail spurs in the ground, which posed a risk of contaminant leakage into the groundwater. The report found no leeching and no major contamination.

And perhaps as important as these reports, Barker hired experts, including an M&A attorney, a personal attorney, and a broker who would help him through the process.

While all of this was going on, Barker was still running the business. And the most important asset in that business is its employees, whom Barker wanted to be sure would be along for the ride.

When Barker informed employees of the potential sale, he told them all that they’d receive an extra year of salary once the sale was complete. Alongside that money, they’d all be given an extra $100,000, tax-free, in gifts from Barker and his wife.

“Everyone of them started to tear up on me,” Barker says. “They had their spouses there, too. It was one of the best things my wife and I did.”

The Result

When the 90 days were over and the time for the sale came, Barker’s hard work paid off. The sale went through for $110 million, a $12 million improvement from the previous offer. The sale went off without a hitch, with the buyer paying in cash.

After the sale, shareholders were happy, employees were happy, and Barker knew his family would be taken care of for generations. His kids all got stock in the company, worth more than $1 million each, and he set up a trust for his kids and grandkids. None of his 5 grandkids will have to worry about paying for college or trade school, Barker says.

Beyond the returns for shareholders, employees, and family, Barker made sure Bell’s legacy would carry on, too.

Through the House of Cheatham Foundation, both the company and the Barker family gifted a $4 million endowment to Clark Atlanta University, one of the country’s Historically Black Colleges and Universities (HBCUs). The money went toward creating The Robert H. Bell House of Cheatham Center for Innovation and Entrepreneurial Development. Named after Barker’s father-in-law and located on the university’s campus, the center will work to increase the number of Black entrepreneurs.

“I think we’re the second largest endowment made to Clark Atlanta,” Barker says. “We went there last year; it was amazing to see.”

Through the M&A process, Barker leaned on and learned from his Vistage group. While he’s not as active in the group post-sale, he’s now seen as an elder statesman by the group, an “enforcer,” as Bradley calls him. He still joins them for dinner, still brings the wine, and is still honest with his group mates, just as they were with him throughout the deal.

Lessons Learned

• Know your next steps. If you know that you’re ready to sell, does that mean staying involved with the company on an employment deal? Exiting completely? Perhaps equally important, he says, is ensuring the family is on the same page and what they want to see as next steps, especially if family members are involved in the business.
• Hire experts. Hire an M&A attorney, a broker with expertise in your industry, and a personal attorney. A personal attorney can help you create a trust or, if you decide to stay on board, an employment contract with the new owners.
• Be honest with staff. Your staff won’t be along for the whole ride, but they will be with the company after you leave. You can’t pull off a deal without your staff, Barker says, so being honest and transparent is important. Reward them for their loyalty, too, if possible.

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