Billionaire Growth Strategies
Buyout Firms Combing U.S. for Sky-High Sums to Invest
Private-equity funds are in a mad dash for cash.
Across the country, nearly 2,000 private-equity firms are making pitches to state retirement systems, corporate pension funds and wealthy investors in the hope of raising nearly three-quarters of a trillion dollars for their next, new funds — more than what was raised over the last two years combined. The push is part of the life cycle of the private-equity industry, which raises investment pools from large institutions and others that typically last about 10 years. Buyout firms combine the money with borrowed cash to acquire companies over the first five or six years and then sell those companies or take them public — at a profit, if all works out — before the 10 years are over.
How Did Tycoon Meshulam Riklis Make His Fortune?
Money is to look at, not to use. – Meshulam Riklis
One of the questions that I get asked on a regular basis is about the possibility of following the tycoon growth strategy without employing debt. The answer is that it is possible to do so. Over the years I have participated on the buy-side in a number of deals with debt averse buyers. One Russian transportation company comes to mind. The management team had basically been given the company for free by the Russian government shortly after the collapse of the USSR in 1991. The managers then threw themselves fully into growing the company internationally, including in the USA. However, their steadfast rule remained “no debt.” Every acquisition had to be financed with internally generated cash.
The downside to avoiding debt is that it will take longer to get started and, thereafter, growth will be slower. However, some people just prefer to avoid the use of debt. In the Playbook we focus on those who utilize well-managed debt to grow because it’s easier to start that way and the growth rate is far higher. If you are starting out without a large war chest, it’s imperative to be creative about financing. If you wait for the heavens to drop your grubstake into your lap, you will be waiting forever. The lesson is start small and fast, then build momentum.
Frontier Capitalism on Discovery Channel
I recently came across a television series on the Discovery Channel called Jungle Gold. In a nutshell, it’s about these two mid-thirtyish Utah real estate speculators who lost all of their money and then decided to go to Ghana to dig for gold. If you are looking for gold these days Ghana is still one of the best places on earth to do it in. It’s the Saudi Arabia of the metal, from what I hear.
Being broke, the two protagonists, Scott Lomu and George Wright, raise some seed capital from investors back home to fund their expedition and the excavators and other heavy equipment they will need. In the very first episode upon arriving at the acreage they’ve leased to mine, they discover that the Chinese are already mining it. Not only that but the Chinese have grim-looking armed guards staring the duo down. So they high-tail it back to town to appeal to the tribal chiefs for help. The old guys are surprisingly sympathetic to their plight but explain that since the Chinese have far more fire power than they do, there’s nothing to be done about it but go dig elsewhere.
Meshulam Riklis on the Use of Debt and Other Insights into Success
Meshulam Riklis is one of the modern era’s pioneers in the use of creative financing to acquire companies. He is also famous for coining such lines as “The effective nonuse of cash” and “Money is to look at, not to use.” They summed up his philosophy of hoarding cash to flaunt in front of bankers and other lenders while at the same time doing most of his empire building with debt financing. As the old joke goes, bankers are the most receptive to giving you money when you can show that you don’t need any.
Top Business Lessons from The Profit’s Marcus Lemonis
Marcus Lemonis may just be the best thing that’s happened to American entrepreneurship in a decade or more. I say this not only because he’s an inspirational rags-to-riches success story, but because he is showing us all how to put the fun back into business after almost two decades of Internet mania.
Indeed one could make the case that the Internet is guilty of two transgressions against business. First, it’s made building a business seem boring, relatively speaking, with its emphasis on coding and SEO maneuvering around Google. If your business career started before the World Wide Web arrived, you’ll know what I mean. Second, the Internet has sucked a substantial portion of America’s best and brightest talent away from producing things that people actually need or want into building bullshit “online platforms” whose sole purpose is to strip-mine your personal information and sell it to advertisers.
If it’s free, you’re the product, Poindexter.
Call me old school, but I will take an Elon Musk or Marcus Lemonis who build real businesses any day over a Mark Zuckerberg and clones who merely build glorified phpBB boards for the purpose of serving you up to advertisers.
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