I think with some recent project work I have chalked up over $40bn of M&A experience, and much more if I include businesses where the deal didn’t progress. One of the most difficult parts of any process, especially important when partnering with Private Equity, is assessing the CEO and management team. The track record will be factually clear but the capability to scale and create the next tranche of value is the question. One of the prime filters I use is how people describe the impact of external factors on their business. For some it is causal and a hard constraint, while for others it is just operating context they adjust to. Back management teams that see beyond the weather, adapting to creating value in all conditions.
On this topic I have three learnings as takeaways. First, when the “weather” or business conditions are good, go for it. Many of my biggest business regrets, and those I have seen in others, are wishing you had pressed further when you had momentum. These periods don’t come often and they never last for as long as you think they will. So be decisive in those moments. Learn to recognize early when you’re on a roll and play it for all it’s worth. One of the themes I will return to repeatedly in these blogs is making moves from positions of strength. Put simply, this is exponentially more likely to be successful, faster and easier than the turnaround briefs many take on. Momentum is a catalyst to be valued and to be exploited. Instead, many kick back and waste it. They take their foot off the gas and bring in the numbers easily, even holding back to create cushion for future years. This is also the time to recognize vulnerabilities and address them. Many businesses couldn’t survive the tough conditions of recent times. They weren’t built to last. They were businesses for good conditions only. Objectively recognize this issue early and use the resources your momentum is creating to address the weaknesses. Deep and objective self-awareness is central to business strategy. The grit in the oyster can often represent the killer insight to be acted upon.
Second, what we are all searching for is ideas big enough to beat the macros. Enduring consumer missions that create long-term opportunity, sustained with necessary adaptation and constant investment. This may sound fanciful, but it really isn’t. I remember an Interbrand survey detailing the top 150 brands, and the average age was around 90 years old. Building big ideas sounds easy, but it is rare, and it is exceptionally demanding on the team. So, the team really matters. The boldest missions are incredibly simple in their clarity of objective but exceptionally difficult to execute. That’s what makes them a big idea. Think of Kennedy’s epoch-making target to land on the moon. We pursue these ideas not because they are easy but because they are hard. On a human level, read Elon Musk’s story of lunch with the great Charlie Munger 15 years ago. Teams that can truly embrace the challenge of a big idea are rare and hard to assemble. It is passion and purpose that makes them tick, holds them together and drives their ingenuity. These are not teams that simply deliver outputs, they design outcomes. When you find these teams, back them to the hilt.
Finally, attitude makes a huge difference in dealing with changing market conditions. The obvious dangers are complacency in good times and being slow to react when conditions change. Competitive teams sustain an intensity through all weathers. They press on regardless. They are always curious externally and in constant dialog with customers and consumers to read changes early. While COVID was an incredibly difficult time for everyone, I remember at the height of the pandemic an article written by a serial entrepreneur I learn from Luke Johnson. He wrote that in the toughest of times there was only one quote you needed. Ferdinand Foch at the battle of the Marne. “My centre is giving way, my right is in retreat, situation excellent. I shall attack”. Winning teams bring a winning attitude to any situation.