Mike Markus

Winning All the Time Creates Weak Acquirers

While boarding my flight to New York City for a Serial Acquirers conference, I got a call from my non-entrepreneurial friend, who asked how on earth I was willing to travel all the way from Europe just to stay a few days in the US... This got me thinking that there are a lot of smart people out there looking to build a company, or acquire traditional niche businesses. Take "boring" companies with EBITDA of $1-5 million. Although, I believe, there is one big problem… They have been doing too well their entire lives. (There hasn’t been enough pain, rejection, or overall hard moments…) They come from good families. All they have seen and experienced is victory. They have everything they want in life. They’ve got all the presents from Santa. They won at home, they won in kindergarten, they won in preschool, high school, and later in college. All they have done is win. They have rarely, if ever, made mistakes, and lost. Just look at the candidates for the top private equity and venture capital firms. Not much has gone wrong in their entire lives. But when it comes to building a firm, an investment firm, a serial acquirer type of company - again, let’s take a portfolio of traditional businesses. First, you need a pipeline of these $1-5 million EBITDA companies; for that you need to be talking to founders, introducing yourself to brokers, you need to talk to investors, raise funding - putting it all together to finally get the deal over the line. Later operate this same company or companies. What happens 99.98% of the time… lots can go wrong. Every week. You look or feel stupid. It's embarrassing. The problem with people who haven't lost or made mistakes before... they can't cognitively process that well. So what’s the reality then? Should they go do another job, back to the W2 world? I don't know whether management consulting has lots of failures, but those people seem really smart to me and seem to do well, maybe they should keep doing that job. They should go do things where if you work hard and are smart, you're going to either win a lot or win a little, but basically you're going to win every day. But a portfolio of traditional businesses should not be built unless they are prepared to experience a lot of mistakes and very, very hard days. The best deal makers, the best investors, the best serial acquirers, the best compounders, need to be able to tolerate the pain... because from time to time, they do.