Becoming A Serial Acquirer Like Berkshire & Constellation

During their latest episode of the VALUE: After Hours Podcast, Valdez, Taylor, and Carlisle discuss Becoming A Serial Acquirer Like Berkshire & Constellation. Here’s an excerpt from the episode:

Tobias: What are your inspirations? Berkshire? What about something like Constellation or–?

Mark: 100%. Yeah, Constellation– [crosstalk]

Tobias: Because they have that same bolt onto the platform, essentially let the CEO of the platform run that. And then, they have many diverse platforms. Initially, software. Now, I understand it’s pretty broad. They’ll do anything.

Mark: That’s right. Yeah. There’s no doubt Constellation is a company we look to in many ways. I think one of the things that I love about Constellation is really the compensation model that they have. I think they’ve just create such tight alignment between management and investors in that way that I think– [crosstalk]

Tobias: What do they do?

Mark: I’ll forget the details, but it is essentially– When they pay their year-end bonuses, which are very metric driven bonuses, I think they might even use an ROIC metric to be the main component of that. But something like 75% of that bonus has to then be used to purchase shares on the open market. I don’t know, if they vest or something like that, but there’s some time component associated with it as well. And so, they’re not just blasting out stock-based compensation like Silicon Valley has popularized over the last 5 years to 10 years. Yeah. You as employees or management, like, you are owners, and you better think like an owner, because that’s where all your compensation is going to come from ultimately.

But then, Danaher is also a company that we really look to, the Danaher Business System. We really think about what we’re building at EBH, the tech enablement playbook, almost that Vista equity playbook. And so, yeah, those are all different flavors of things that companies and leaders that I look to as in many ways, I think went against the grain. What I love about Mark Leonard was he was a former venture capitalist himself. It’s incredible to see the company that he’s built.

Jake: Do you ever get your hands on the Vista, the folder? I’ve never seen it either. I’ve always been curious to see what the hell is in there. [laughs]

Mark: No.

Tobias: Not that he’s going to admit publicly on the– [crosstalk]

Mark: Yeah. [laughs]

Jake: Yeah, me either. [laughs]

Mark: I’ve heard a bit about it, and have known some people that have been through transactions with them in different aspects. Look, honestly, I’m sure there’s lots of interesting insights in there. I think the allure of it is what I find to be most compelling.

Jake: No real silver bullets, right?

Mark: I doubt it. Look, I think [unintelligible [00:31:44] did an amazing job with this in many ways. I think investment management, whatever asset class you’re in, you’re still building a product. You still have to market. I think marketing and narrative is a really important component of these businesses. I think what Vista did there is incredible on that front. I hope it’s real in terms of exactly how it is. But even if it’s not, it’s amazing. It’s awesome. [laughs]

Jake: Yeah, technology.

Mark: Yeah, exactly.

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