“The five things my partner and I are responsible for at our HoldCos”
M&A Growth
We do not delegate deal flow. It is up to us to find the opportunities, evaluate them, and decide if they are the right fit for us. We handle all negotiations of price, terms of closing, and coordinate both legal and financial due diligence. Once a company is acquired, its respective Managing Director will lead the onboarding process.
2. Overall Cash Flow system and allocation
Our overarching KPI is cash. We measure our companies on their ability to convert net income into operating cash flow. We then invest what is necessary to maintain our current operation and sweep excess cash to the Holding. Excess cash can be used for four things, pay down debt, invest in organic growth, acquire a new business, or accumulate for the future. All growth plans are compared to other available opportunities, and we determine the best use of cash.
3. Attract, Retain, Incentivize CEOs
We choose who runs our companies, create their incentive plans, set yearly goals, and evaluate progress. Besides which company to acquire, this is hand down the most important decision we make. Who runs the business will determine how successful the investment is. All our CEOs receive base compensation and a profit share. We will also occasionally establish large (think 2x yearly salary) one-time incentives for hitting aggressive targets.
4. Broad-based HR Benefits from HoldCo down
Getting the right people in the right seats is the CEO's job. At the Holding level, we look to implement broad-based HR benefits that make their job a bit easier. Creating an attractive place to work and taking care of our people is good business and it is simply good. It is the right thing to do.
5. Raising capital and financing
Probably the job we like the least. If our internal cash production is not sufficient for an acquisition or growth plan, we are responsible for securing the capital needed. That could be via an equity raise, debt financing, or a mix of the two. Neither my partner nor I are born salesman. We do not enjoy the roadshow or pitching ourselves and try to do it as little as possible.