Business Acquisition Criteria
The business must have a moat – some reason why other businesses would struggle to compete.
No matter how great your business is, if we can’t understand it, we can’t purchase it. Having a seller stay on for a period post-acquisition – whether as a regular employee or on a consulting business – can help the bridge the gap.
We look for companies with a return on capital higher than the median for their industry. Steady higher-than-median returns are good; higher-than-median and growing returns are better.
We’re primarily looking to buy great businesses at a fair price rather than OK businesses at a low price. This follows from our long-term holding strategy: since we’re not trying to sell an acquired business after a few years, we;d rather pay more for an excellent business.
While we’re open to any business so long as it meets meets the acquisition criteria above, we do have preferences / focus areas. If we stumble upon an interesting business that doesn’t meet these preferences, we will still consider it, but usually the thresholds are higher: e.g. a business outside our geographic focus would have to be particularly easy to understand and require less owner involvement.
Out of Focus
South Florida is poised to grow and we’re close by. Miami being major city and the “capital” of Latin America, the warm climate, a lower cost of living relative to northern US metros, the lack of a state income tax, and a generally business-friendly state government all suggest that South Florida’s best days are in the future.
Chicagoland, Greater Boston, and New York City
Although we don’t have the same convictions about future growth as we do with South Florida, we’re confident these three cities will remain major economies. We’ve selected these as secondary geographies because we already have close connections with them.
Our experience is in the USA. We don’t have anything against investments in foreign countries. But we believe that you have to have a deep understanding of a foreign country to invest in a foreign company.
Canada, because of its geographic proximity, large proportion of English speakers (hence why Mexico is excluded), and cultural similarity is an unlikely, but potential, option.
Industry/Business Category Focus
Out of Focus
- Light manufacturing
- Information technology
- Real estate
- Financial services
- Business services
- Restaurants & bars
- E-commerce drop-shipping
- Affiliate marketing
- Web design