4 Leaders every team needs

Owners of companies can be very touchy at being boxed or labelled, yet since Aristotle, humans have been put into 4 categories. Here is Paul Maritz, president and C.E.O. of the software firm VMware, a former leader of 10,000 people at IBM chatting about his 4 types he wants on all the teams he manages.

I think that in any great leadership team, you find at least four personalities, and you never find all four of those personalities in a single person.

You need to have somebody who is a strategist or visionary, who sets the goals for where the organization needs to go.

You need to have somebody who is the classic manager — somebody who takes care of the organization, in terms of making sure that everybody knows what they need to do and making sure that tasks are broken up into manageable actions and how they’re going to be measured.

You need a champion for the customer, because you are trying to translate your product into something that customers are going to pay for. So it’s important to have somebody who empathizes and understands how customers will see it. I’ve seen many endeavors fail because people weren’t able to connect the strategy to the way the customers would see the issue.

Then, lastly, you need the enforcer. You need somebody who says: “We’ve stared at this issue long enough. We’re not going to stare at it anymore. We’re going to do something about it. We’re going to make a decision. We’re going to deal with whatever conflict we have.”

You very rarely find more than two of those personalities in one person. I’ve never seen it. And really great teams are where you have a group of people who provide those functions and who respect each other and, equally importantly, both know who they are and who they are not. Often, I’ve seen people get into trouble when they think they’re the strategist and they’re not, or they think they’re the decision maker and they’re not.

Letter of Intent Sample That Watches for Bear Traps

The Letter of Intent for Merger and Acquisitions is a document between a purchaser and a seller used to outline the initial terms of a merger and acquisition transaction between two companies. The Letter of Intent Sample details the purchase of stock, price, closing date, etc. and often helps streamline negotiations when the transaction is complex. This document is essential for protecting your interests during negotiations.

Private equity accessing debt again

Private equity is using debt again. While it is harder to get a home loan or small business loan, large companies and private equity, established players can access cheap bank debt. The US is showing how with its large players - Carlyle and Blackstone. There is a radically different view by each of these giants, but I believe that shows the health of PE and its ability to bring different views to their business. Take a look:

Blackstone, in reporting a 23 percent jump in third-quarter earnings, said it had found the market to buy out companies unappetizing. “There are some good companies being sold, but we just can’t get to the prices that are required,” Hamilton E. James, the company’s president, said Thursday morning.

Carlyle, though, is gobbling up companies. Not long after Mr. James’s bearish comments, Carlyle announced a $2.6 billion deal for Syniverse Technologies, a voice and data services provider for telecommunications companies. On Wednesday, it completed a $3 billion takeover of CommScope, a maker of telecommunications equipment.

The divergent approaches highlight how cheap corporate debt is fueling the recovery of the private equity business. While it remains difficult to get a mortgage to buy a home or to get a loan to fund a small business, yield-starved investors are creating a robust market for corporate bonds and loans.

Private equity firms are seizing upon the corporate-debt boom in myriad ways. For the debt-heavy companies they already own, Blackstone and Carlyle are improving their balance sheets through aggressive refinancing. Corporate loans are now available to do multibillion-dollar buyouts, too, but the easy lending environment has created fierce competition for takeover targets, driving up prices. The corporate loan market “is almost hard to believe,” Mr. James of Blackstone said.

Private equity’s outlook is certainly brighter today than it was one year ago. Buyout firms have made $173 billion worth of deals this year, up 95 percent from last year, according to data from Thomson Reuters.

Blackstone, co-founded by Stephen A. Schwarzman, may be reluctant to do deals at the moment, but its earnings report underscored just how favorable the environment has become. The New York-based firm, with $119 billion in assets under management, said its third-quarter profits were bolstered by sharp increases in the value of its real estate holdings.

Public companies have become enslaved

Top Silicon Valley player, Gordon Davidson, says that tech companies should drop the IPO goal and focus on private equity and staying as a private business. Davidson is the lawyer behind the mega deals of the past so his views are important to note. Let's look at his reasoning:

The soft-spoken Davidson, chairman of powerhouse law firm Fenwick & West, has had a hand in more than 100 mergers and acquisitions and some 30 initial public offerings — most of them in tech. He's also a lawyer for Cisco Systems, venture firm Kleiner Perkins Caufield & Byers and others.

So it's a bit shocking to hear him downplay the importance of tech IPOs today. For proof, he cites Facebook, Zynga, Twitter, Yelp and others: None is in a particular hurry to sell shares via the stock market.

"Good companies can go public in any market," Davidson says. "Today, it is easier to be a private company than a public one." Public companies "have become enslaved by the expectations of analysts and shareholders," he says.

Those forestalling public offerings are older, better-known companies that have yet to be enticed by a recent uptick in tech IPOs. For older start-ups, a new breed of private-equity investments are an attractive substitute, especially in the face of the weak advertising market that so many social-media companies depend on for revenue.

Such investments in late-stage start-ups such as 6-year-old Facebook, nicknamed "DST deals" — after Russian investment firm Digital Sky Technologies, which started the trend by funneling tens of millions into Facebook and Zynga — are a recent phenomenon. The money goes to buying shares owned by employees or early investors.

The strategy has been accentuated by several crosscurrents: the lingering effects of the worst bear market since the Great Depression; readily available private equity, in the form of investments by firms such as Andreessen Horowitz and DST; and the costs of complying with public company regulations such as the Sarbanes-Oxley Act,which established new standards for boards, management and accounting firms following accounting scandals at Enron, WorldCom and others.

"It is undeniably harder to be public today than 20 years ago," says Bill Gurley, a partner at venture-capital firm Benchmark Capital.

Consumer spending data is misleading for Canada

With Canada's GST and HST, Economist Michael Mandel's article Consumer Spending is *Not* 70% of GDP may not completely apply. Mandel does go through why shopping is not the be-all and end-all, he also explains the apparent discrepancy between retail sales and consumer spending. Let's take a look.

I opened up this morning’s NYT and see the big headline “Retailers See Slowing Sales in a Key Season.” And I just know that we are about to have another round of “consumer spending is 70% of gross domestic product, so blah blah blah blah of course we can’t recover unless consumers start spending again.” (Not in the NYT story, to their credit, but you can find similar quotes everywhere you look).

Blah blah indeed. As a textbook author, there are few things that frost me more than hearing “consumer spending is 70% of gross domestic product,” because it perpetuates two very large and very misleading untruths.

First, the category of “personal consumption expenditures” includes pretty much all of the $2.5 trillion healthcare spending, including the roughly half which comes via government. When Medicare writes a check for your mom’s knee replacement, that gets counted as consumer spending in the GDP stats.

At a time when we are wrangling over health care reform, it’s misleading to say that “consumer spending is 70% of GDP”, when what we really mean is that “consumer spending plus government health care spending is 70% of GDP.”

Second, an awful lot of those back-to-school dollars are going to imported clothing and school supplies (how many of those laptops and iPods do you think are made in the U.S.?). A dollar of consumer spending does not translate into a dollar of domestic production.

In fact, the whole way that the BEA presents the GDP statistics points the public debate in the wrong direction. GDP stands for “gross domestic product”—that is, domestic production. But the breakdown of GDP is into expenditures categories—personal consumption expenditures, government consumption expenditures, etc.

I think we need to move towards presenting GDP in terms of production, rather than spending. We need a shift from the consumer to the producer as our main unit of analysis.

But for now, we need to stop being so darned obsessed with consumer spending.

Citi selling Private Equity to Stepstone

Stepstone Group LLC said Wednesday that it has closed its acquisition of $4 billion private equity funds from Citigroup Inc. (C) as the investment bank seeks to offload its alternative assets units ahead of U.S. new financial rules discouraging banks from engaging in risky trades with their own money.

Financial details of the transaction weren't disclosed but the package includes fund of funds, mezzanine and co-investment businesses.

A voting machine for good businesses

"The public market is a voting machine in the short term, weighing machine in the long term," said Randall Abramson, Trapeze Asset Management. This quote came from one of Randall's favorite economic experts, Benjamin Graham, who was also one of Warren Buffet's mentors. Randall was going through his company's rational for investing, and running a demonstration of their extraordinary algorithm which made sense. Showing Disney's stock journey over the past few decades, gave a compelling snapshot to back up Randall's view that good investing is about value and digging deep to find undervalued companies. There were many opportunities to buy a seriously undervalued Disney stock and other times when the stock was too over priced to be an attractive investment.
The message was clear: fickle public opinion does not out perform the long term value of a business.
The public market has been a voting machine for future success, based on the talent and innovativeness of the management team and their employees and resources. The long term focus has been damaged though, as bubbles hammer good companies who do not deserve to have their stock reduced due to the foolishness of other businesses forgetting good business practices. The crash hurt sensible, wise investors with its sudden plunges.
This volatility of stock price, which is mostly out of the control of management, is the number one reason given by CEOs for frustration with public markets. Harvard reported that 88% of CEOs preferred running a private business without the pressure.

Jacoline Loewen, author of Money Magnet: Attract Private Equity Investors to Your Business

Succession Planning Should Focus on Selling the Business

Less than 3% of family businesses make it to the third generation. That arresting factoid prefaces Every Family’s Business, a book dealing with succession planning for family businesses. In this book review by Canadian Business expert, Larry MacDonald, he reveals how the author, William Deans, draws on a wealth of personal experience: he is a fourth-generation businessman and ran his father’s 250-employee chemical business for ten years prior to its sale. MacDonald says:

This remarkable book is written in the dialogue style of David Chilton’s The Wealthy Barber. It was first released in 2008 and has sold over 100,000 copies so far. Deans himself is much in demand and has done over 300 presentations around the world. He operates out of Hockley, Ontario and has a website at www.everyfamiliesbusiness.com.

When it comes to succession issues surrounding family businesses, most books and advisors deal with how to transfer control to younger family members. But Deans thinks the focus should instead be on selling the business at fair value whether it is to family or non-family. 

I would add in here that you can sell to private equity either fully or staggered over five to twenty years.

This sale will all chips off the table and not only assures a more secure retirement for the owner but often leaves behind greater wealth to distribute to heirs. MacDonald says:

Many business owners want to hand over their beloved enterprise on easy terms to children as an act of love or because they wish to leave their business behind as a legacy. But for a variety of reasons, as discussed in Every Family’s Business, the transfer often leads to acrimony and dysfunction within the family. It can also culminate in insolvency or a sale at a low price to a non-family buyer.

Read more Here

Why today’s investors must think globally

History reminds us that no nation ever pays off its debts outright, and that all government debt is eventually – and inevitably – inflated away.
It may be quiescent for now, but to ignore the time-bomb of inflation is to do so at one’s own peril. It’s a risk that could well be reflected in an ever-rising gold price (currently over U.S. $1300 an ounce, and counting), as well as an ever-sliding (and cheaper) U.S. dollar.
The U.S. dollar, the world’s reserve currency, keeps on sliding despite the pressures on China to lift the value of its yuan and a growing groundswell of foreign currency posturing.
The latent inflation risk is another reason why investment strategies must remain focused on equities. Besides, it’s invariably better to be an owner than a debtor and to have interest (and dividends) payable to you rather than by you – and ever more so now.
Adding to the case for being an owner rather than a loaner is a global economy being slowed by the U.S. but offset by a burgeoning new world order led by Asia, Latin America, BRIC (Brazil, Russia, India and China) and other rising powerhouses.
There’s also China’s ever-lengthening investment clout, witness Potash Corporation of Saskatchewan contemplating a Chinese white knight to rescue it from the hostile (and underpriced?) clutches of BHP Billiton? It’s but one more example of why today’s investors must think globally.
In Europe there’s encouragement too, despite nation-wide strikes in France and intensified payback stresses in Greece, Ireland, Iceland and others.
In Britain, the determination of David Cameron’s new coalition government to get on top of its huge debt and deficit problems remains especially noteworthy. One respected English friend writes: “The majority of the British people know that the problem must be addressed now and will back the government against an overpaid, overprotected and quite often bone-idle public sector”. Another comments on how many UK companies have come through the recession surprisingly well and have sustained earnings better than might have been expected.

You can never count the U.S. out

Tony Boeckh (of the Bank Credit Analyst) puts the case for today’s America best: “It’s got a trillion-dollar deficit monkey on its back, its consumers have been gutted, its housing and banking sectors could take years to recover, and its currency is a dog…. You can never count the U.S. out – it has an incredible ability to rediscover itself and rejuvenate.”