Average Deals
Someone asked me about Permanent Equity’s average deal the other day, so I pulled the numbers. On average, I reported back, when we make an investment we buy 75% of a company, write a $20M check, and pay six times beer money.
But, I said, you may want to be careful with how you use this information because we don’t own 75% of any company and have never written a $20M check nor paid six times beer money. Instead, we own anywhere from 51% to 100% of our portfolio companies, have stroked checks ranging from $5M to $68M, and paid (leaving aside the nuance as to how some of these investments were structured) as little as two and as much as 12 times beer money.
Now, when I tell people about this deviant behavior, the reactions are not down the middle either. In fact, one potential investor declined to continue chatting with me, saying “your deals seem funky and capital deployed is too intermittent.”
Okay, then.
But this particular investor said, “That’s great. The fact that you all have done such a wide variety of deals shows that you’re taking advantage of the flexibility of your fund structure and lends credibility to your claim that you’re always trying to do things that make sense.”
Exactly.
See, no two deals are alike for us and there is no average deal. That’s because we view sellers of businesses as our customers and our product as capital. And since money can easily become a commodity where the only better is more, we try to offer our customers differentiated and personalized products that best achieve what they are trying to accomplish. In some cases, yes, that’s money, but in others it can be things like partnership, certainty, legacy, or peace of mind (or some combination of all of the above). That doesn’t mean we win every deal, of course, but we find that since our offers tend to stand out, they usually garner presentation and at least some consideration.
And since nothing gets done without first being considered, here’s to never being average.
-Tim