This webinar on Investment and Business Portfolios was another successful one. The panelists were Guy Spier, Managing partner and principal of Aquamarine Capital / Aquamarine Fund and Johan H. Andresen, Chairman and owner, Ferd.
Here are some of the key issues that were discussed:
1) Strategy
Follow the plan and the strategy that you have developed before this crisis hit. Avoid impulsive/unmotivated changes. But be prepared to make certain revisions.
Work with a crisis template. Remember there are both unintended consequences and surprise consequences. Be careful.
Save capacity to support the companies for longer periods of time.
”Luck happens to the prepared." - Roald Amundsen
2) Leadership
Don’t be the oracle or the philosopher. Be the principal. We can't foresee a crisis like this, but we can act appropriately and responsibly.
Break the crisis down to manageable dilemmas.
Go to a psychological place of forgiveness as leader. You will have regrets somewhere. Be accepting.
You may struggle with the differences between the person you would like to be during these times, and the person that you are capable of being.
Sometimes it is okay to not make any decision at all. Few people can make good decisions during severe crisis times.
3) Cash
During this crisis, there may be lower cash contributions than before from operating entities in one’s portfolio. Plan for this in your portfolio. Choose the pain you carry.
Support each of your businesses with cash as needed. A feeling of being safe is key!
Each business should be allowed to keep the cash it is generating. This leads to more entrepreneurship.
4) Investment opportunities
Be conservative and careful when it comes to investing in new activities – in general, do not do it! If you do invest, be open-minded and flexible. And remember that it is not like before. The capital situation is constrained, and you are likely to make some mistakes.
Be even more critical now when evaluating investment opportunities: Does it solve a basic problem? Can it be or is it profitable? Does it have good industry dynamics?
Exceptions - when you do choose to invest:
There may be relatively inexpensive opportunities to acquire as bolt-ons to your existing businesses.
Support entrepreneurs but be particularly careful not to invest too early.
Try to involve a solid partner, who might be ready to remain part of an investment long-term.
Shift to online businesses, take your cash burn down, change supply lines to local or more local - closer to home.
Consider bright spots such as cloud computing sector, online businesses, retail spaces that can be repositioned or reconfigured. ESG, agritech, foodtech, oceans, climate, green mobility, prop tech.
5) Management
The management teams in place must be trusted. If confidence lacks there, they may try to get out.
Look for a good partner. You can value invest when it comes to companies, and you can value invest when it comes to people.
Give the person you trust a percentage of ownership.
There are many sociologists out there who advise, predict and tell us what to do. Having your own skin in the game, and working with people who do, or hiring management who is financially involved can give you access to the current reality and not the predictions.
6) Other points
Restructuring may be relatively easy during periods of crisis. It may be easier to get the necessary buy-ins from key shareholder groups then, including from unions. It goes without saying that such restructuring must be well merited, and not opportunistically driven (say, excessive lay offs).
Publicly traded stocks are, of course, easy to unload on the stock market. There will inevitably be some “adjustments” in most portfolios when it comes to the parts of those that are publicly traded.
Please note:
1) Please note that this document is a summary of the major issues discussed and does not imply agreement or recommendations (business, transaction, investment, strategy) of any kind from moderator or participants. The Notes are written to allow for review of topic/s addressed during the event and should only be treated as such. Please contact us if you have any questions or need more information: contact@lorangenetwork.com
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