Lowe's goes public: Leonard Herring recalls all the wheeling and dealing revolving around the company's IPO.

• Position: BOOK EXCERPT

Carl Buchan once told a reporter: "When I was a little boy, I never wanted to be a policeman or a doctor or a fireman. I just wanted to make a million dollars." By 1960, he had done that several times over, but it didn't make him any less driven. He found a bigger goal: to make Lowe's Cos. the largest and most successful business of its type in the world, owned and controlled by the people who built it. Starting with a hardware store his father-in-law opened in North Wilkesboro in 1921, he rode the post-war building boom with his retail genius to create a 15-store chain. He also assembled an executive team, he believed could achieve, that larger goal: Pete Kulynych, purchasing; Joe Reinhardt, distribution and data processing; Bob Strickland, marketing; Johnny Walker, sales; and Leonard Herring, finance. But a heart attack killed Buchan, 44, in October 1960, before the Lowe's profit-sharing plan could begin to acquire the 90% of company stock he owned. What follows is a hard lesson in high finance from the memoirs of Herring, Lowe's president and CEO from 1978 to 1996. The first part, published in last month's issue of the magazine, can be found at www.BusinessNC.com/herring.

In the end, it was a connection at Wachovia Bank and Trust--executor of Carl's estate--that led to a solution. Dick Page previously had worked at Guaranty Trust Company of New York, and he made a call. That led to other calls, until a phone rang on the west coast of Florida at the offices of Bevis Industries. Bevis, a mortgage company and maker of shell homes, was a failing enterprise that had been circling the drain for months. Its main life support at this point was one determined Yankee named Gordon Cadwgan (pronounced Cadoogan), an investment banker who had pumped a client's funds into Bevis and now was damned if he would stand by and watch that investment disappear. Cadwgan was a partner in the firm of G.H. Walker & Co. in Providence, R.I., but lately he had been spending more than half his time in Florida, trimming Bevis down in an effort to keep it alive. Eventually he succeeded.

When he took the call at Bevis that day, Gordon heard the voice of his young assistant in Providence, Bob Huckins, who said, "Mr. Walker [George Herbert Walker, an uncle of the 41st U.S. president] wants to know if you would mind stopping in North Carolina the next time you head home. There's a former Guaranty Trust officer there named Dick Page who would like to talk to you." Gordon said he would do it.

He flew to Winston-Salem on a Friday morning in April and met Dick Page, who told him about Lowe's and the situation with Carl Buchan's estate. Gordon was intrigued enough to drive up to North Wilkesboro and meet our team. Decades later, he still remembers his first North Wilkesboro experience. It featured an overnight stay at the old Wilkes Hotel, a wide-eyed visit to a Baptist revival tent and the Friday night scene of cars and pickup trucks cruising the small-town streets.

We liked Gordon immediately and unanimously. He was obviously intelligent and seemed vaguely aristocratic, although that might have been the effect of his New England accent and his education at Brown University--an education that, he would later tell us, his mother had cleaned houses in order to give him. He was a good listener and took in everything we told him without raising an eyebrow, as if he dealt with situations like ours every day. Maybe a well-run little company like Lowe's, even in its current crisis, made a pleasant change from the woes of Bevis.

We talked to Gordon all afternoon, until finally he said that he would think about our situation overnight and meet with us again in the morning. We assumed that he wanted some time to consider the possibilities, but what he really needed was, simply, a meal: He hadn't eaten since leaving Florida. We were so intent on supplying him with information that we had forgotten to supply him with food. Gordon was in his mid-40s then and had seen the inner workings of lots of businesses. He told us later that the most important lesson he had learned was, "Don't bet on balance sheets and income statements; bet on people." As he thought about Lowe's over dinner and through the course of an evening stroll, he focused his financial acumen on two or three points that he thought might advance our cause. But he wouldn't have gone any further if he hadn't thought that our team was a good bet.

The next morning we met again, and at the end of the session Gordon said that he would continue to think about it and would get back to us. Somehow, although he hadn't promised anything, we were encouraged. Bob Strickland remembers all of us agreeing that "he's the one!" We might have neglected to feed him, but we didn't make him retrace his route through Winston-Salem: We asked Max Freeman, Lowe's pilot, to fly him to Raleigh, where he caught a commercial flight home.

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Back in Providence at G.H. Walker, Gordon worked out a plan that would make it possible for us to borrow money to buy Carl's stock from the estate, then take the company public and sell enough shares to pay back the money we had borrowed. He felt good enough about this plan that he made an appointment to meet with us again on his next trip to Florida. This time, we asked Lowe's general counsel Bill McElwee and banker Ed Duncan to join us.

Gordon told our group that as long as it was in the estate, Carl's stock had less value than it was really worth. This was because there was no market for it (as Wachovia, the trustee for his estate, had discovered) and because it had no practical operating control. We should be able to buy the stock at a price...