Good quarter, Strategy, Private equity report, The Motive, That’s not good enough
8th March 2020 Evolution Partners Newsletter
“When someone congratulates me on a good quarter they don’t realize those results were fully baked about three years ago.” – Jeff Bezos
Hope you’re Thriving!
I’ve had a quieter week where I’ve been recording an online course for my book Made to Thrive which explains the 5 roles of a leader. It’s still far from half complete, but it’s coming along well and gives me the opportunity to dig deeper into the tools.
I love that Jeff Bezos quote above, and it’s something I’m trying to build with my clients, quarterly financial projections 3 years out. It’s really hard, and takes a lot of data, strategic execution capability and confidence in your plan. But executing a quarterly result that was set 3 years ago is a great sense of control for leaders to have. One other thing I saw about Jeff Bezos this week was his favourite interview question, from the early days when he used to interview people for jobs at Amazon – “Are you a lucky person?”
Why did he ask that?
It was the easiest way to tell if people were optimistic or pessimistic. His reasoning was that optimistic people intuitively say they are lucky, and he wanted to surround himself with optimistic people.
This week Bain & Co released their 2020 Private Equity Report that analyses the major deals from 2019.
I’ve outlined a few interesting points for you below.
- More than 55% of Private Equity deals had a multiple greater than 11x EV/EBITDA
- The high multiples were not reflective of only technology companies but rose in all sectors from 2011 to 2019
- True leverage may be higher as banks allow PE firms to leverage based on PROJECTED earnings (not actual earnings)
- Deals with EBITDA multiples >6x rose to more than 75% of all deals
- Less than 40% of deals done at <6x leverage
Finally, of 65 fully realised deals that were analysed 71% failed to meet their projected margin improvement, which was slated as critical to the deal.
Last week I wrote in this newsletter about Warren Buffets shareholder letter and this week I discovered another interesting quote. “In 2019, Berkshire sent $3.6 billion to the U.S. Treasury to pay its current income tax. The U.S. government collected $243 billion from corporate income tax payments during the same period. From these statistics, you can take pride that your company delivered 1.5% of the federal income taxes paid by all of corporate America.”
I tried hard to not comment on Coronavirus this week, as it is the main story in the media everywhere, but I found this article from HBR you might find valuable.
An idea I’m interested in
I had a colleague ask about the similarities between The Motive and my book Made to Thrive. Fortunately, I heard Patrick say on his podcast that his book isn’t about the roles of a CEO (the subject of my book), but instead, it’s about why a person wants to be a leader.
From Pat “There are two reasons to become a leader of an organisation. First, you look at the responsibility and say ‘oh my gosh, now it gets more serious than it’s ever been. I’m about to become a CEO and it’s going to get harder than it’s ever been in order to benefit these people and customers.’
You say oh my gosh, I am now the CEO, I’ve arrived, this is now the reward for a lifetime of hard work. Finally, I get to do what I want to do, and stop having to do all those things that I had to do to get here.’
It’s binary, people are either motivated one way or the other”
I agree with the concept and has certainly been my observation, I look forward to reading the book and letting you know my thoughts.
What I’m listening to
Recently on Pat Lencioni’s podcast, I enjoyed an episode about 4 words — “That’s not good enough”. It’s really interesting what people say when something is done within a team that doesn’t meet their standards, either as a subordinate or co-worker, or boss, what a person will say in response.
When your peers do things that aren’t up to your expectations, what do you say (if anything at all)? Some examples include — Let’s see how that goes, That’s not good, Can you do better?
But nothing is as powerful as “That’s not good enough”.
If you did something and your peers didn’t think that it was good enough, wouldn’t you want to know? I sure would!
When was the last time you provided such valuable, direct feedback, and when will be the next time?
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