There Are No Gordon Gekkos at 20 South Partners

"Hey Mark, call this private equity firm. I like the way they wrote their email message."

Yeah, right. The reward for being on the Inc. 5000 list is getting every private equity firm from here to Venus calling to find out if you are ready to cash in.

You see, I'm the guy who gets to call back PE firms who have contacted my clients to listen to their speal about who they are and the businesses they are interested in buying. And, they're typically tire kicking to see if my clients are good acquisition candidates.

My stereotype of a PE firm is one that makes swift financial cuts after an acquisition and looks to sell their investment in 3-5 years. While I know that's not true for all PE firms, I know I'm not the only person holding this opinion.

I shouldn't be too harsh. I've developed some good relationships from these calls where we stay in touch several times out of the year. That will be the case with 20 South Partners.

When I contacted Scott Lauber, one of the founders of 20 South Partners, I was impressed immediately. Their partnership and vision are unique. They don't buy and flip, they buy and hold--for a long time that is.

Since I was asking Scott more questions than he was asking me, I was able to document some of his insightful answers below with his permission.

Question One: Tell me a little about you and the firm's history and companies you target.

Scott: We focus on acquiring and growing one business into its next chapter of success. The roots of 20 South Partners stem from a long-time friendship that began during our freshman year at Boston College.

During and after our time at BC, we often discussed launching our own business together, but ultimately realized that we could better achieve our goal of having a lasting impact on people through buying and running an established business.

We’re excited to use our entrepreneurial backgrounds, coupled with our private equity and management consulting experience, to propel a small business to the next level while safeguarding the employees and customer relationships that have been built. It’s a unique approach and an electrifying journey.

We are searching for a founder-owned business in which the owner is interested in retiring or reducing his or her role at the company. Our approach offers a unique succession plan with an emphasis on legacy preservation. In terms of the characteristics of the business we are targeting, we are attracted to businesses in the U.S. with outstanding customer retention, a history of profitability (over $1m annually), promising growth potential and a strong culture.

Question Two: How is your model different from the typical private equity firm. Is your model becoming a trend?

Scott: Our model is special in that we are focused on acquiring one business and then putting all our time and energy toward running and sustainably growing that business. Some might say “all of our eggs are in one basket,” which is a huge difference from the typical PE firm portfolio model. We are looking for a great company that we envision running for a long time as we’re not a distant private equity firm or corporation focused on cost-cutting and quick growth. It’s also worth mentioning, we’ve partnered with a diverse group of investors who bring industry expertise and operating experience and are acting as our advisors in the process.

Our model is becoming increasingly popular because it matches passionate entrepreneurs with years of practical experience managing teams and puts them in a prominent operating position where they can be extremely successful running and growing a legacy business. We certainly feel the mission resonates with the baby boomer population on the verge of retirement and we’re excited about the possibilities.

Question Three: Your selection process probably starts out with a phone call or email. From beginning to end, how long does it take to complete an investment?

Scott: Our search process truly revolves around finding the “right company” for us from a financial and personal perspective. We’ll begin with a high-level discussion about the owner, the business and his or her aspirations for the future. We will then work to understand the day-to-day details of the business and, if a good fit, begin crafting a mutually agreeable offer to acquire the business.

Furthermore, we understand that selling a business is an important decision and we ensure the process is smooth and efficient. Transparency from both sides is key to avoiding roadblocks and creating a painless experience. When an owner begins down the path to selling his or her business, they will primarily deal with us, the future of the business. The process is not managed by outside parties or those without skin in the game. From start to finish, the process takes several months as it is not an overnight decision and developing a relationship while truly understanding the motivations from both sides is crucial.

Question Four: How important is the organization’s culture when selecting a company to invest in. How do you ensure a great culture gets even better?

Scott: Corporate culture is one of the most important characteristics we consider, and it is truly one of the reasons we pursued this model in the first place. We have seen the disasters of a poor culture first hand in our previous professional careers at companies we worked with. Culture starts with creating a vision that every employee can get behind. From there, it is important to help employees understand their roles, properly motivate them and give them the tools to succeed. We plan to use our values of integrity, humility, passion, and respect to guide us as we shape the culture of the company we acquire.

We partner with a business owner to ensure a smooth transition, with little disruption to the employees and customers. We will work with the business owner to ensure a proper transition period and identify key team members / middle management that can help with the transition. We aim to keep the strong management team in place that has been key in previous successes of the business.

Question Five: If a business owner wants to reach out to you, how should they do so?

Scott: We welcome any business owner that is thinking about his or her succession plans and wants to learn more about our approach and if it might be the right fit. You can easily reach us at [email protected] or give us a call at 415-547-0899.

About the Writer

When Mark Gandy is not antagonizing co-founders of private equity firms, he also writes at Free Agent CFO™ and CFO Bookshelf, his new sandbox.

Mark is a long-time consultant helping small business owners build wealth in their businesses by growing their marketing, sales management, and operations capabilities through his practice G3CFO.