More Capital Than Ever In Human History

Bain’s 10th  Annual Report Yields Startling Information Every Business-owner Needs Now

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RUN! DON’T WALK

We are often asked, “What’s going on in the markets? What deals are hot right now?  Where is the money flowing?”

The answer is that there is more money chasing more deals than ever before in human history.  Bain reports there is now over $2 trillion seeking deals.

BainBain

What types of deals?  Buyouts continue to be the most popular deal type with sponsor-to-sponsor deals increasing in size and frequency – one private equity firm buying a company from another private equity firm – with North America and Europe dominating the deal flow.  Business services, software, distribution, healthcare and insurance are the leading industries in terms of overall investment.  Private lenders deserve an honorable mention here – this space has seen tremendous cash inflows in the last two years.

Why is the private equity space so active and flush with cash?  The returns justify the allocation of capital, outperforming publicly-traded equities in all major market regions:

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These are heady times in the private equity markets.

What does this mean for you as a business owner?

It means that the party rages on, flashing a sell signal to you.  The time to sell is when markets are at a peak.  Notice the word “a” not “the” because no one knows when the tide will turn, we just know that it markets are cyclical.  The yield curve just flashed an ominous sign portending a recession.  The top red line shows short-duration US Treasuries yielding more than longer-dated US Treasuries – a perfect predictor of recession every time this has happened since WWII.

US yield curve 0319

VCA Graphic from treasury.gov data

And the time to sell is when markets are at a peak.  If you wait too long, squeezing the last bit of juice out of your capital expenditures and other investments, you risk becoming fodder for the type of “distressed” investor that dominated the market during the Great Recession:

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Hint: you want to be an “opportunistic” investment target, not a “distressed” target.

The message of the day: Run!  Don’t walk.  The time to act is now.

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Vertical Capital Advisors can help your business plan and execute strategies that enable your enterprise to thrive in all market conditions.

Call me.  It is time to plot your strategy to maximize the exit value of your company.

Bain: bain.com/contentassets/2792a2cbcdcf4e94acfddc077a85c5ea/bain_report_private_equity_report_2019.pdf

 

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ABOUT VERTICAL

Vertical Capital Advisors is an Atlanta-area boutique investment banking firm built on creating tangible value for our clients, serving clients in just about every industry.  Our clients are both capital growers and capital allocators.  How can Vertical help your firm maximize value?

 

Joe Briner
Managing Director
Vertical Capital Advisors LLC
briner@verticalcapitaladvisors.com
866-912-9543 ext 108
678-591-0273

 

3 Tactics Amazon CEO Jeff Bezos Uses to Make High-Velocity Decisions – Even When He Disagrees With the Decision

Amazon recently released Jeff Bezos’ 20th annual letter to shareholders (https://www.sec.gov/Archives/edgar/data/1018724/000119312517120198/d373368dex991.htm).  His letters are always packed with practical information and this one had some excellent points.

Jeff writes:

“To keep the energy and dynamism of Day 1, you have to somehow make high-quality, high-velocity decisions. Easy for start-ups and very challenging for large organizations. The senior team at Amazon is determined to keep our decision-making velocity high. Speed matters in business – plus a high-velocity decision making environment is more fun too. We don’t know all the answers, but here are some thoughts.

First, never use a one-size-fits-all decision-making process. Many decisions are reversible, two-way doors. Those decisions can use a light-weight process. For those, so what if you’re wrong? I wrote about this in more detail in last year’s letter.

Second, most decisions should probably be made with somewhere around 70% of the information you wish you had. If you wait for 90%, in most cases, you’re probably being slow. Plus, either way, you need to be good at quickly recognizing and correcting bad decisions. If you’re good at course correcting, being wrong may be less costly than you think, whereas being slow is going to be expensive for sure.

Third, use the phrase “disagree and commit.” This phrase will save a lot of time. If you have conviction on a particular direction even though there’s no consensus, it’s helpful to say, “Look, I know we disagree on this but will you gamble with me on it? Disagree and commit?” By the time you’re at this point, no one can know the answer for sure, and you’ll probably get a quick yes.

It’s a genuine disagreement of opinion, a candid expression of my view, a chance for the team to weigh my view, and a quick, sincere commitment to go their way.”

Jeff Bezos is passionate about remaining a Day 1 company because “Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death” and “Day 2 companies make high-quality decisions, but they make high-quality decisions slowly.”

Your future self may not agree with every decision you make today so knowing that the best and brightest often make decisions with only 70% of the information they would like and many decisions are reversible (you can go back out the door you came in) form a sound safety net for just about any decision you will make and should give you the confidence to move forward toward your goals and dreams.  And in a business setting, having the option of saying “I disagree but will fully commit to your plan” empowers others to achieve what for you, with your individual experiences, talents and lenses through which you view the world, might be impossible.

Remember, “you need to be good at quickly recognizing and correcting bad decisions”.  Whether you agreed with the decision or not, your future self needs to be adept at spotting bad decisions, rapidly course correcting, and learning from them.  In our business we have done team post-mortems to dissect the causes of failures, ensuring that the entire team benefits from the learnings.  We all grow stronger and better at our roles when we share our successes and our failures.  We use a kaizen process that keeps the failures few and small and yields larger successes with increasing frequency.

 

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At Vertical Capital Advisors, we are most often engaged by industry leaders to be the bridge to the capital they need to fuel growth.  We start with great leaders at great companies that have compelling, profitable business plans where the only missing ingredient is capital.

ABOUT VERTICAL

Vertical Capital Advisors is an Atlanta-area business advisory firm built on creating tangible value for our clients, serving clients in just about every industry.  Our clients are both capital growers and capital allocators.  How can Vertical help your firm maximize value?

Joe Briner
Managing Director
Vertical Capital Advisors LLC
briner@verticalcapitaladvisors.com
866-912-9543 ext 108