The new way of investors partnering with owners

Our research with the owners and CEOs of private companies and their private equity partners illustrates that there are three leverage points for investors to impact the trajectory of the business: 

1. Strategy and strategic contacts, 
2. People, and 
3. Execution. 

Loewen & Partners provides investors with a window of meaningful involvement in a portfolio company that goes far beyond the typical boardroom interaction. It allows a private equity partner to rapidly come up to speed on the key issues within the firm and help leverage the potential of the firm.

Click on who we are to get some background on our partners. To explore the RED™ process in detail, go to what we do.

Family-owned companies run by eldest sons tend to be managed relatively poorly.

"I do not want to hand him the business yet, as he is only 28 years old. Yet, I do need to retire and get my money out of the business. I'm only 47 years old," said this owner of a large business at a YPO dinner in Yorkville last night.
She shrugged, "Too bad that he cannot have the company but I am not ready to hand it over."
This is how the Queen must feel with Prince Charles wanting to take over the throne; he is simply not ready or competent enough. As I chatted with this entrepreneur and mother about her succession plans, she expressed her frustration. Despite having her eldest son running her business, I sensed she, like the Queen, did not respect his ability to take the ball and run with it.
"Succession planning is my biggest issue. All my money is tied up in that one business. Can you imagine that?" she worried.
Yes, I could.
I see it all the time. Owners do not know their options available. Meanwhile, they jeopardize their entire family wealth. McKinsey and Co have researched the results of handing family businesses to elder sons and the results should make this mum stop, "gulp" and take another look at using private equity.

Family-owned companies run by outsiders appear to be better managed than other companies, a study finds, while family-owned companies run by eldest sons tend to be managed relatively poorly. Moreover, the prevalence of family-owned companies run by eldest sons in France and the United Kingdom appears to account for a sizable portion of the gap in the effectiveness of management—and perhaps in performance—that we observe in their companies relative to those of Germany and the United States.

These findings come from a study of more than 700 midsize manufacturers in France, Germany, the United Kingdom, and the United States. The study, conducted by McKinsey and researchers at the London School of Economics,¹ looked at the quality of key management practices relative to performance metrics (such as total factor productivity, market share, sales growth, and market valuation) and found that they are strongly correlated.² On a scale of one to five, with five being the highest, US and German manufacturers scored best on these metrics (3.37 and 3.32, respectively), while French and UK companies scored worst (3.17 and 3.09).³

Which are better - public or private boards?

Advocates of the private-equity model have long argued that the better PE firms perform better than public companies do. This advantage, these advocates say, stems not only from financial engineering but also from stronger operational performance.
Directors who have served on the boards of both public and private companies agree—and add that the behavior of the board is one key element in driving superior operational performance. Among the 20 chairmen or CEOs, McKinsey & Co. recently interviewed as part of a study in the United Kingdom,1 most said that
PE boards were significantly more effective than were those of their public counterparts. The results are not comprehensive, nor do they fully reflect the wide diversity of public- and private-company boards. Nevertheless, our findings raise some important issues for public boards and their chairmen.
When asked to compare the overall effectiveness of PE and public boards, 15 of the 20 respondents said that PE boards clearly added more value; none said that their public counterparts were better. This sentiment was reflected in the scores the respondents gave each type of board, on a five-point scale (where 1 was poor and 5 was world class): PE boards averaged 4.6, public boards 3.5.

5 Tips to attract more revenues to your business

Wanting to attract more money to your business? Add on consulting.

Developing a consulting suite of skills has many side benefits, one of these is getting to know your client better. At the private equity firm, Loewen & Partners, the economic downturn - OK, cliff dive - meant they had to look for revenues elsewhere. Loewen & Partners had the blueprint on how to raise money for businesses but more than that--they knew the strategy required to achieve growth once businesses got their big payment. This was a scarce skill set, particularly with Canadian companies lulled into complacency by being next to the world's best market--America.

Since expanding into consulting services, Loewen & Partners has been impressed with how their client relationships have deepened and they have been able to push the growth strategies developed at the time of the capital raise. The best part is that the firm no longer has to be a transaction driven corporate finance expert. They get to stick around and be the high integrity, results-driven relationship that they always wanted.

Here are some of Loewen & Partners’ tips:

1. Design daring documents. You're charging consulting clients a pretty penny for access to your blueprint for success. That blueprint better be detailed, adaptable and actionable.
2. Speak to your current relationships. To uncover consulting prospects, make it a habit to ask clients to stick their necks out for you and make some introductions. When beginning, consider charging clients below-market rates in exchange for referrals.
3. Exploit internet connections. Social networking, blogging, Linkedin Groups are valuable, low-cost vehicles for spreading the word about your consulting service.
4. Tune in to opportunities. Train yourself and your sales force to listen to clients and prospects to spot opportunities to bring up your consulting services when a situation warrants.
5. Boomerang back frequently. Don't leave implementation of your recommendations to a client to chance. A positive outcome is critical, especially for a fledgling consultancy in need of glowing references, so stay in touch with clients to be sure they are continuing to execute the plan you put in place. 

Surprised by who won the UK's top green contract?

I was expecting to be bored out of my skull by corporate jargon and those charts dotted with activities on some flow chart, but my first contact with Siemens was the complete opposite. I was in Johannesburg and had organized a "Strategy Summit", inviting a range of companies to present their practices around innovation. 
The Siemens Project Ventures team arrived looking alarmingly like Mr. Smiths in the Matrix movies but then they put up their first slide and blew us away. Their innovation project was examining the fastest uptake of cell phones - South Africa went from zero to 60% within a year. They tied this to looking at the vast geographic ranges with little technological investment and how to make money from that scenario.
These mostly German young men then went on to explain how their findings were being applied to China and India where there were similar technological and geographic challenges.
I was not surprised to read that Siemens Project Ventures  won the British government's contract for a wind farms. If you read the fine print, none of these windmills will be made in Britain, instead Germany will get the jobs, keeping that German engineering competence sharp. Here's part of the story and a link:

The successful bidders for the nine new British offshore wind farms have been announced, paving the way for the UK’s most ambitious renewable energy project, which aims to deliver a quarter of the UK’s electricity by 2020.

Costing £75 billion, the new wind farms will be on a far bigger scale than anything so far in Britain and are expected to create 70,000 jobs.

 However, there is concern that few of the 6,000 turbines will actually be made in the UK. The companies granted licences today to build the farms will not be obliged to source any parts from domestic manufacturers and most are expected to buy turbines made in Denmark or Germany.

Jacoline Loewen, expert in raising capital for companies who want to grow and author of Money Magnet.