Shore Capital's success in acquiring and operating small businesses stems from its codified process, focus on thematic investing, and a team-oriented approach that leverages early-career energy and the expertise of experienced executives, resulting in impressive returns and a loyal workforce.
Takeaways
• Shore Capital's success relies on its codified system for idea generation, deal execution, and portfolio management, which enables it to complete over 600 acquisitions in three years.
• The firm focuses on thematic investing, targeting small businesses where founders excel clinically but lack business acumen, and implements systems and processes to improve efficiency and performance.
• Shore Capital's strategy involves acquiring businesses with an average revenue of $18.5 million, an average EBITDA of $3.5 million, and a multiple of 7.5x, leveraging them two times and targeting industries where value can be created through consolidation and scale.
• Operational excellence is the cornerstone of Shore Capital's investment approach, which involves leveraging a large volume of transactions to create an ecosystem of experienced executives and implementing improvements in acquired businesses, resulting in impressive returns.
• Building a strong board of directors with industry experience, providing options as compensation, and creating a fun and supportive environment are essential for the success of private equity investments.
• Shore Capital's thesis investing process involves industry research, roadmap development, and team collaboration to identify and execute investments with a focus on ROI and risk management.
• Creating an environment where partners feel like part of a team and negotiate with a long-term shareholder mindset is crucial for successful negotiations.
• Shore Capital's approach to building a strong team and creating unfair advantages includes home-growing CEOs and CFOs, hiring top talent, stacking unfair advantages like location-specific knowledge and a technology stack system, and empowering individuals to negotiate their own deals.
• Shore Capital focuses on acquiring businesses in growing industries, improving their operations, and then selling them to larger strategic or financial buyers, generating high returns by creating strong demand and implementing a technology stack system.
• Shore Capital retains talent by paying market comp or above, creating a friendly and supportive environment, and providing a long leash with appropriate check-ins.
• Matt Ishbia and Jahm Najafi, the Phoenix Suns' new owners, aim to create a raving fan experience, take care of employees, be a community asset, and win championships while facing the challenges of running a sports franchise.
• Private equity firms can scale and maintain efficiencies by hiring talented individuals, implementing clear processes, learning from mistakes, creating a culture of continuous improvement, and embracing new ideas.
• Knowledge sharing, efficient communication, and creating an environment where people can learn from each other are crucial for the growth and success of investment firms.
