While working on a recent transaction where we represented a seller who was looking to complete a Management Buyout sponsored by private equity groups, one of the potential equity sponsors told us, “We will only invest in this transaction if there is another investor group who invests along side us.” “Is that to minimize your risk,” I asked. “No, it is our requirement to have a co-investor because it validates our investment philosophy.”
In other words, like sheep who flock together, this investor group was satisfied with an investment so long as someone else came to the same conclusion. “But what if you like the opportunity but do not find a co-investor,” I inquired of the group. “Then we walk away from the opportunity,” I was told.
This group, and many others with same investment criteria, are not willing to trust their own instincts but need validation from others. Ultimately, this is a sheep mentality… following others at all costs.
Eagles, on the other hand, hunt and soar alone. They find their prey and seize the moment. Eagles have the courage and temerity to make their own decisions based on their own standards and criteria and seize the moment regardless of what others around them are doing.
We need not look much farther than Warren Buffett’s investment strategy, which never changes; all would agree Mr. Buffett is no sheep. Evidence of this was Berkshire Hathaway’s moves in the late 1990s. While all the world was investing in any deal with a “dot com” attached, Mr. Buffett refused to follow the crowd, even while being skewered in the press for his “dinosaur investment strategy.” Ultimately, as history has shown, Mr. Buffett had the last laugh.
When considering your acquisition options, lay out your strategy and stick to it, even if others in your industry do not follow suit. Trust your process and your advisors and resist the temptation to follow the crowd; do not become a sheep.
Remember, ultimately, all sheep end up either shorn or slaughtered. Soar like an eagle rather than risking losing everything.
posted by Jim Zipursky