If you were to look into the term “investment”, there’s every chance that Marc Leder is going to follow on in a future sentence. This is one of the most renowned figures in the industry, with his work with Sun Capital always being mooted.
While it can be said that every investment company is going to have their own formula for buying businesses, some would suggest that all of them at least have similar principles in mind.
In relation to Leder, and his work with Sun Capital, he has highlighted three points in various interviews. Through the course of this article we will now take a look at these three things in-detail, to show what type of businesses tend to be targeted when it comes to an acquisition of this ilk.
Can the investor’s operational expertise make a difference?
This is one of the first thing that investors like Leder look at.
One of key things that separate the good from the average when it comes to investing in companies is their operational expertise. Without this, they don’t bring anything to the table. They would simply take over a business, and not really be able to make any difference apart from financial investment. In a lot of cases, this just isn’t sufficient.
This is one of the reasons why a lot of investment companies specialize in specific areas. For example, if we turn to Sun Capital, something that they make a habit of investing in is restaurant chains. It means that when the time comes to buy another restaurant business, they have plenty of knowledge and experience of the industry and can make cost savings through their contacts, as well as general efficiency benefits through what they have learned in the past.
Is there a strong management team in place?
One of the big misconceptions about acquisitions of this type is that investors are keen to replace the existing management team. This is completely false; if they are forced into doing this it adds a lot to their bottom line, as well as making timelines much longer.
It means that companies want to take over a business that has a strong existing team in place. This team obviously has to have certain characteristics; it has to be open to change and willing to partner with the investors to make that elusive progress.
The market leader factor
This next point might be more relevant to some investment companies than others, but it is something that Leder has indicated nevertheless.
He has commented that another one of the crucial elements of Sun Capital’s acquisition plan is to opt for companies which are market leaders. This is because they already have the resources in place to make them the best in the business; and quite often just need a few minor changes to make them operate more efficiently. If they aren’t a leader in the market, it can mean that a lot of work is required to get them there and this just isn’t covered in the investor’s exit strategy.
