Quality Brand Mittelstand | The Acquirer's Multiple®

In her recent interview on The Acquirers Podcast with Tobias, Linda Lebrun, Director of Finance & Investing Writer Recruitment at Substack, discussed Quality Brand Mittelstand. Here’s an excerpt from the interview:

Tobias: Did you have a look at The Private Investment Brief, used to call it the Quality Brand Mittelstand?

Linda: Yeah.

Tobias: Are you familiar with that? Does that factor in at all?

Linda: Great concept.

Tobias: Yeah, isn’t it?

Linda: I would say it does, to the extent that if you have companies where they may not have an aspiration to become the next Amazon or the next giant industrial conglomerate, but they dominate within their niche. I think, also, what goes along with the Quality Brand Mittelstand concept is to be the best at what you do, and to be very fixated on keeping the quality level high, because there’s always the entropy in the universe, especially as you get bigger or grow higher, enter new businesses, will corners will be cut. The attention to quality of a business is important.

To give another example of that, not just public companies, but large organizations often get confused, because they think, “Okay, I need to have a mission statement, I need to have a set of values.” They come up with all this self-expressive stuff from a marketing seminar. If you were to grab one of the employees on the street and say, “Hey, what’s the mission of your company?”, they would just give you the blackest look ever. Whereas I find with small and medium sized companies that do well, the founder, or the CEO, if he’s not a founder-CEO, they will still have this mentality of the values and what we all care about is very clear. Who and what comes first is very clear, and no one would make a mistake about it. Ben Horowitz’s books talk a lot about this, in terms of corporate culture is made by a series of decisions and choices and choosing whether I stay at the Holiday Inn Express or the Four Seasons, everybody thinks, “Oh, I know the answer to that is Holiday Inn Express. That’s the right answer, right?” Well, that may not be the right answer. It may be if you have a salesperson who needs to rest before he does a massive multimillion dollar presentation. You want them to be at the four seasons. The point is, if your corporate culture is intentional, you will know prospectively what the answer to that is going to be.

Bringing it back to public companies, I think that when you read the document, you read the annual report, you read the letter to shareholders that the company writes, and you observe how they act and you observe whether there’s consilience, you can tell whether they have that clear, coherent set of values that probably puts you on the right track for sustainability. If it’s very confused and jargony, I mean, to me, it’s a red flag.