Private Equity Digs Deep Down Under

A report from Australia confirms that private equity is continuing its metamorphosis as it seeks innovative means of reaching targeted returns. The private equity market is still active, though not to the same degree as 12 to 18 months ago. Firms are continuing to work on their portfolio companies, complementary acquisitions deals for existing portfolio companies, and of course, the growing popularity of acquiring distressed debt.
Posted by Jeffrey Watson, Loewen & Partners

Make the world a better place

"In a way, the world is a great liar. It shows you it worships and admires money, but at the end of the day it doesn't. It says it adores fame and celebrity, but it doesn't, not really.
The world admires, and wants to hold on to, and not lose, goodness. It admires virtue. At the end it gives its greatest tributes to generosity, honesty, courage, mercy, talents well used, talents that, brought into the world, make it better.
That's what it really admires. That's what we talk about in eulogies, because that's what's important.
We don't say, 'The thing about Joe was he was rich.' We say, if we can, 'The thing about Joe was he took good care of people.'"—Peggy Noonan, "A Life's Lesson," wrote this at the passing of one of her journalist colleagues, Tim Russert.
I credit Peggy Noonan for Ronald Reagan's success as she wrote many of his speeches, bringing back that combination of big vision but pulling it back down - like a kite string - to how the big idea applies to each of us.
Are you using your talents to build up the people in your team, to create a great place to work and in your own way, making the world a better place? If so, hats off to you. Keep going.
The private equity money will recognize your tenacity to keep adapting to how to apply your talents to make the world a better place. This spirit is the essence of good management and good teams get the best finance partners.

Is Your Company As Much Fun?

I recently ran a strategy workshop for a large NGO. They get given a cool $11 million grant from the government every year plus their work contracts are bought by the government. That is a lot of support from tax payer money. The NGO staff work in a beautiful office building and the culture exudes quiet competence. Their skills and staff are impressive and I have to say, I had a great time working with the top team. What a lovely group of happy, proud and smart people.

Attending the strategy workshop was a branding expert. As the top management team went through their branding exercise, choosing key words to describe their business, this consultant talked about MARS - the venture capital incubator for uprising start ups. He spoke about how there is a sense of urgency with crackling energy in the air. The core brand MARS has developed is "speed to market". The brand expert could see that the NGO needed that same fire to the feet urgency to get their many products to market rather than dotting every i and making it 100%. In the real world of finding customers to transfer their cash from their wallet to your hand, there is real pressure.

This NGO might want to be speedier but everything in their business model cuts them the slack to not feel pressured about making money from satisfied clients. They are enjoying making Canada a better place - seriously - and they have made Canada a better place in their way. Plus their culture is very supportive, making it a truly marvelous place to work. Except that employees now push back at any mention of the D word - dollars.

I think we all need to understand the enormous differences in culture that develops and grows from the forces and demands exerted on the staff and owners. In the case of the NGO, there ain't ever going to be a sense of urgency because if some division has a shortfall, guess what, it doesn't matter. The bank is not going to threaten the owner and the staff will get their payroll paid. Where is the force to push for urgency?

These not-for-profits provide a great job environment. I looked around the room at the impressive team. They were more intellectually rigourous and more open to discussion of sticky issues than many management teams. It was almost like being at a Club Med resort because everyone was so relaxed and - hey, tomorrow was another day making a difference for Canada.

When I work with early stage companies, there is none of that laid back, let's think about it and reach consensus attitude. It's time to make money or bust. It's a fight every day. That's why MARS has to make "speed to market" a core part of its brand rather than making Canada a better place. There is just not the luxury of being socially responsible.

Is it dangerous for the Canadian economy to have so many great people working in these tax backed companies rather than having to make their way in the commercial world? Maybe these NGOs are keeping the great talent for themselves rather than the economy which makes the revenue to pay the taxes that then get passed to the NGOs. Whatever. I honestly can say I enjoyed myself so much I think I'm going to get myself a job at a not-for profit. Then I can stop worrying about making customers satisfied.

Mind of the Entrepreneur

Eager to start my entrepreneurial career, back in the early days, I asked a seasoned entrepreneur what founding a company felt like. I think I expected him to use words like “Freedom!” “Excitement!”, “Satisfaction!”
Instead, the main word I recall from our lunch was “Ignorance.” Specifically, he related to me a cautionary tale: The best talk he’d heard at a conference on business start-ups he’d recently attended focused on ignorance as the key to entrepreneurship. What the conference speaker meant was that if the average entrepreneur truly knew how hard it would be to build a company, nobody would ever begin. It takes ignorance to want to start a company from scratch.
My friend’s weary look, four years after founding his company, told me he wasn’t kidding. In all my excitement to begin, I’m pretty sure I had no idea what he was talking about.
A few weeks later, I visited my bank manger.
Before I even sat down, she commented to me: “You’ve got the grin of someone who just started her own company.”
“Yup!” I said, smiling.
She said, wisely I now understand, “You’re going to lose that smile. But hopefully, some day, you’ll be able to get it back.”
The optimism of that meeting has not left me in the subsequent years, but I have certainly had the smugness challenged. I’ve come to appreciate their thoughts. Business is tough and not for the faint hearted.

Returns for Private Equity Will Surpass 2007

Stephen Schwarzman, CEO The Blackstone Group, a private equity firm, says that now is a good time for deals in the industry. Despite turmoil in credit markets and weakness in the U.S. economy, according to Mr. Schwarzman, returns for deals made now could far surpass the deals of 2007.
“The heyday of 2007 was pretty remarkable in terms of the kind of credit one got,” Schwarzman says. “It’s unclear whether the deals done during that period will offer the best returns for private equity investors.”

- Jeff Watson