The Shotgun Fund

Judge Delivers Shotgun

Judge delivers shotgun

June 2001

Here's a story about a little deal that broke all the rules of the Shotgun Fund. But when the Judge ruled, we simply had to help.

The company in question had been operating for only three months. No profits. Inexperienced management. But a great idea, growing revenues and profitability just around the corner.

The principal had formed the business with two equal partners. Three months into operation, his two financial partners chose a Friday afternoon to take his keys, change his computer passwords, install a new operator and announce that if he did not take a Nonsense amount for his one-third interest by Monday morning, they would wind up the business.

The principal called his lawyer and, at 9:00 Monday morning, they appeared before Mr. Justice N.O. Nonsense who made short work of the matter. The principal was reinstated as the operator. Costs were awarded. The two financial partners were given a proper tongue-lashing. And Mr. Justice N.O. Nonsense confirmed that a shotgun had been executed at a Nonsense price for each one-third of the company.

Then the lawyer called us.

While the deal did not fit the Fund’s investment criteria, we found it so compelling that we made a commitment within an hour of meeting the principal. We purchased the position of the partners who pulled the shotgun and gave enough equity to the principal to make us equal partners. We made our investment outside the Fund — with most of the Shotgun Fund participants taking up their pro rata share.

This shows that there are all sorts of ways we can help. So whenever you have a client in a Shotgun situation or looking to fund a Succession issue, don't hesitate to call. Or, go tell it to the Judge….

Name the Judge, and for the first ten correct answers… we will buy you a sandwich.