Is there any risk that's more heightened associated with pursuing C&R vs a career in healthcare or TMT investing? Was worrired about any future headwinds that may hinder the growth of the sector, and ultimately put me out of a job vs my counterparts in sectors like HC/TMT/Industrials
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Personal interest is important. If you would rather claw your eyes out than read about the latest B2B SAAS company (like me) then you’ll have a hard time ever doing well in the space regardless of perceived tailwinds. Consumer, if anything, is more resilient / less subject to existential disruption than any of the other sectors you mentioned albeit subject to a bunch of short term volatility and general consumer weirdness.
hard to make money as an investor, cyclical, boring business models, lack skill / edge that comes from an industry with a steeper curve
There a bunch of successful C&R shops out there like Sycamore, L Catterton, Stripes, TSG, etc. What are your thoughts on those?
Successful in terms of what? Think returns are weak
almost spit out my drink when I read Sycamore and "successful C&R shop".
TSG has historically been very good, but their 2018/2019 fund is a dumpster fire (i think marked at 1x still if i remember correctly), so they screwed up recently.
consumer has a harder curve than software unless you're a tourist
disinfo lol, consumer is the easiest vertical (and hence most useless) to learn by a landslide
Can you expand on why? People typically say consumer is one of the easier ones
Consider how you can reach 25% IRR / 3x MoM in an LBO: EBITDA growth (sales growth and margin expansion) + Leverage (debt paydown) + Multiple Expansion.
Most Consumer subsectors don’t grow more than low to mid single digit. Some even have declining volumes (e.g. beer, tobacco) and don’t typically lend themselves to PE.
Some companies will still be able to grow quite fast, particularly if you have an international expansion story.
Generally though if you want to do large cap PE you will often be a lot more reliant on add-on M&A and margin expansion to drive your returns than you would in e.g. tech investing.
One thing that is good is that multipes are comparatively low vs other sectors so you can fund a relatively larger part of an acquisition based on debt, which enhances returns.
Multiple expansion is typically not underwritten by ICs (beyond roll-ups) so let’s exclude that.
Consumer sectors (particularly discretionary) are of course dependent on the macroeconomy and consumer sentiment can impact valuation multiples. But more importantly they are also shaped by changing consumer trends (some might see these as more tricky to diligence vs potential disruptive innovation in e.g. Healthcare).
Much of consumer of course suffered during Covid lockdowns. Bad investments by PE firms were probably often caused by backing Covid trends that were seen as essentially permanent. For example, there just hasn’t been the expected level of growth of e-commerce players (we are now in a world of omni-channel retail).
Consumer investing is about really thinking hard about how we will shop, what we will want to eat/drink, etc in the future and getting those right. On top of that a lot of it is about brands and brand-building. And that’s exciting.
Do really small. Or really big investment
I’m convinced that no one can actually underwrite “brand building” - it’s incredibly hard and random. There are not many investors I can name that can consistently pick the right winner
and the ones that did success hard to know luck from skill. in many ways easier in public markets because you can change your mind constantly (vs in the private markets, assuming brand durability for 5+ years is very difficult outside of luxury and CPG)
Wholeheartedly disagree with a lot of this. Plenty of consumer brands grow extremely quickly. When done with sustainable unit economics, most of that results in attractive payback periods. Consumer also tends to be more corporate centric as well, compared to simply financial engineering towards a sale to another sponsor. This pushes multiples higher than a sponsor would pay. The sales motion also can have more momentum given you’re not selling to enterprise. Not saying there aren’t risks obviously, but most of this isn’t accurate.
Wholeheartedly disagree with a lot of this. Plenty of consumer brands grow extremely quickly. When done with sustainable unit economics, most of that results in attractive payback periods. Consumer also tends to be more corporate centric as well, compared to simply financial engineering towards a sale to another sponsor. This pushes multiples higher than a sponsor would pay. The sales motion also can have more momentum given you’re not selling to enterprise. Not saying there aren’t risks obviously, but most of this isn’t accurate.
Wholeheartedly disagree with a lot of this. Plenty of consumer brands grow extremely quickly. When done with sustainable unit economics, most of that results in attractive payback periods. Consumer also tends to be more corporate centric as well, compared to simply financial engineering towards a sale to another sponsor. This pushes multiples higher than a sponsor would pay. The sales motion also can have more momentum given you’re not selling to enterprise. Not saying there aren’t risks obviously, but most of this isn’t accurate.
Yes of course - let’s say restaurants often have great roll-out stories and I did mention international expansion. But the truth is as companies get bigger (and become potential targets for large cap PE), there’s often a bit less whitespace - particularly 5 years later when you exit.
And yes, strategic exits can sometimes be achieved. But in reality, as I mentioned, most PE firms are not able to take that to an IC - and do you really want to depend on that for an investment to be successful? Think it should rather be an upside case.
It’s a very exciting space as I described but far from every asset is a great fit for PE.
Wholeheartedly disagree with a lot of this. Plenty of consumer brands grow extremely quickly. When done with sustainable unit economics, most of that results in attractive payback periods. Consumer also tends to be more corporate centric as well, compared to simply financial engineering towards a sale to another sponsor. This pushes multiples higher than a sponsor would pay. The sales motion also can have more momentum given you’re not selling to enterprise. Not saying there aren’t risks obviously, but most of this isn’t accurate.
Wholeheartedly disagree with a lot of this. Plenty of consumer brands grow extremely quickly. When done with sustainable unit economics, most of that results in attractive payback periods. Consumer also tends to be more corporate centric as well, compared to simply financial engineering towards a sale to another sponsor. This pushes multiples higher than a sponsor would pay. The sales motion also can have more momentum given you’re not selling to enterprise. Not saying there aren’t risks obviously, but most of this isn’t accurate.
Wholeheartedly disagree with a lot of this. Plenty of consumer brands grow extremely quickly. When done with sustainable unit economics, most of that results in attractive payback periods. Consumer also tends to be more corporate centric as well, compared to simply financial engineering towards a sale to another sponsor. This pushes multiples higher than a sponsor would pay. The sales motion also can have more momentum given you’re not selling to enterprise. Not saying there aren’t risks obviously, but most of this isn’t accurate.
Wholeheartedly disagree with a lot of this. Plenty of consumer brands grow extremely quickly. When done with sustainable unit economics, most of that results in attractive payback periods. Consumer also tends to be more corporate centric as well, compared to simply financial engineering towards a sale to another sponsor. This pushes multiples higher than a sponsor would pay. The sales motion also can have more momentum given you’re not selling to enterprise. Not saying there aren’t risks obviously, but most of this isn’t accurate.
Wholeheartedly disagree with a lot of this. Plenty of consumer brands grow extremely quickly. When done with sustainable unit economics, most of that results in attractive payback periods. Consumer also tends to be more corporate centric as well, compared to simply financial engineering towards a sale to another sponsor. This pushes multiples higher than a sponsor would pay. The sales motion also can have more momentum given you’re not selling to enterprise. Not saying there aren’t risks obviously, but most of this isn’t accurate.
Wholeheartedly disagree with a lot of this. Plenty of consumer brands grow extremely quickly. When done with sustainable unit economics, most of that results in attractive payback periods. Consumer also tends to be more corporate centric as well, compared to simply financial engineering towards a sale to another sponsor. This pushes multiples higher than a sponsor would pay. The sales motion also can have more momentum given you’re not selling to enterprise. Not saying there aren’t risks obviously, but most of this isn’t accurate.
Wholeheartedly disagree with a lot of this. Plenty of consumer brands grow extremely quickly. When done with sustainable unit economics, most of that results in attractive payback periods. Consumer also tends to be more corporate centric as well, compared to simply financial engineering towards a sale to another sponsor. This pushes multiples higher than a sponsor would pay. The sales motion also can have more momentum given you’re not selling to enterprise. Not saying there aren’t risks obviously, but most of this isn’t accurate.
Wholeheartedly disagree with a lot of this. Plenty of consumer brands grow extremely quickly. When done with sustainable unit economics, most of that results in attractive payback periods. Consumer also tends to be more corporate centric as well, compared to simply financial engineering towards a sale to another sponsor. This pushes multiples higher than a sponsor would pay. The sales motion also can have more momentum given you’re not selling to enterprise. Not saying there aren’t risks obviously, but most of this isn’t accurate.
Wholeheartedly disagree with a lot of this. Plenty of consumer brands grow extremely quickly. When done with sustainable unit economics, most of that results in attractive payback periods. Consumer also tends to be more corporate centric as well, compared to simply financial engineering towards a sale to another sponsor. This pushes multiples higher than a sponsor would pay. The sales motion also can have more momentum given you’re not selling to enterprise. Not saying there aren’t risks obviously, but most of this isn’t accurate.
Wholeheartedly disagree with a lot of this. Plenty of consumer brands grow extremely quickly. When done with sustainable unit economics, most of that results in attractive payback periods. Consumer also tends to be more corporate centric as well, compared to simply financial engineering towards a sale to another sponsor. This pushes multiples higher than a sponsor would pay. The sales motion also can have more momentum given you’re not selling to enterprise. Not saying there aren’t risks obviously, but most of this isn’t accurate.
Wholeheartedly disagree with a lot of this. Plenty of consumer brands grow extremely quickly. When done with sustainable unit economics, most of that results in attractive payback periods. Consumer also tends to be more corporate centric as well, compared to simply financial engineering towards a sale to another sponsor. This pushes multiples higher than a sponsor would pay. The sales motion also can have more momentum given you’re not selling to enterprise. Not saying there aren’t risks obviously, but most of this isn’t accurate.
Wholeheartedly disagree with a lot of this. Plenty of consumer brands grow extremely quickly. When done with sustainable unit economics, most of that results in attractive payback periods. Consumer also tends to be more corporate centric as well, compared to simply financial engineering towards a sale to another sponsor. This pushes multiples higher than a sponsor would pay. The sales motion also can have more momentum given you’re not selling to enterprise. Not saying there aren’t risks obviously, but most of this isn’t accurate.
Wholeheartedly disagree with a lot of this. Plenty of consumer brands grow extremely quickly. When done with sustainable unit economics, most of that results in attractive payback periods. Consumer also tends to be more corporate centric as well, compared to simply financial engineering towards a sale to another sponsor. This pushes multiples higher than a sponsor would pay. The sales motion also can have more momentum given you’re not selling to enterprise. Not saying there aren’t risks obviously, but most of this isn’t accurate.
Wholeheartedly disagree with a lot of this. Plenty of consumer brands grow extremely quickly. When done with sustainable unit economics, most of that results in attractive payback periods. Consumer also tends to be more corporate centric as well, compared to simply financial engineering towards a sale to another sponsor. This pushes multiples higher than a sponsor would pay. The sales motion also can have more momentum given you’re not selling to enterprise. Not saying there aren’t risks obviously, but most of this isn’t accurate.
Wholeheartedly disagree with a lot of this. Plenty of consumer brands grow extremely quickly. When done with sustainable unit economics, most of that results in attractive payback periods. Consumer also tends to be more corporate centric as well, compared to simply financial engineering towards a sale to another sponsor. This pushes multiples higher than a sponsor would pay. The sales motion also can have more momentum given you’re not selling to enterprise. Not saying there aren’t risks obviously, but most of this isn’t accurate.
Wholeheartedly disagree with a lot of this. Plenty of consumer brands grow extremely quickly. When done with sustainable unit economics, most of that results in attractive payback periods. Consumer also tends to be more corporate centric as well, compared to simply financial engineering towards a sale to another sponsor. This pushes multiples higher than a sponsor would pay. The sales motion also can have more momentum given you’re not selling to enterprise. Not saying there aren’t risks obviously, but most of this isn’t accurate.
Wholeheartedly disagree with a lot of this. Plenty of consumer brands grow extremely quickly. When done with sustainable unit economics, most of that results in attractive payback periods. Consumer also tends to be more corporate centric as well, compared to simply financial engineering towards a sale to another sponsor. This pushes multiples higher than a sponsor would pay. The sales motion also can have more momentum given you’re not selling to enterprise. Not saying there aren’t risks obviously, but most of this isn’t accurate.
Wholeheartedly disagree with a lot of this. Plenty of consumer brands grow extremely quickly. When done with sustainable unit economics, most of that results in attractive payback periods. Consumer also tends to be more corporate centric as well, compared to simply financial engineering towards a sale to another sponsor. This pushes multiples higher than a sponsor would pay. The sales motion also can have more momentum given you’re not selling to enterprise. Not saying there aren’t risks obviously, but most of this isn’t accurate.
Wholeheartedly disagree with a lot of this. Plenty of consumer brands grow extremely quickly. When done with sustainable unit economics, most of that results in attractive payback periods. Consumer also tends to be more corporate centric as well, compared to simply financial engineering towards a sale to another sponsor. This pushes multiples higher than a sponsor would pay. The sales motion also can have more momentum given you’re not selling to enterprise. Not saying there aren’t risks obviously, but most of this isn’t accurate.
Wholeheartedly disagree with a lot of this. Plenty of consumer brands grow extremely quickly. When done with sustainable unit economics, most of that results in attractive payback periods. Consumer also tends to be more corporate centric as well, compared to simply financial engineering towards a sale to another sponsor. This pushes multiples higher than a sponsor would pay. The sales motion also can have more momentum given you’re not selling to enterprise. Not saying there aren’t risks obviously, but most of this isn’t accurate.
Wholeheartedly disagree with a lot of this. Plenty of consumer brands grow extremely quickly. When done with sustainable unit economics, most of that results in attractive payback periods. Consumer also tends to be more corporate centric as well, compared to simply financial engineering towards a sale to another sponsor. This pushes multiples higher than a sponsor would pay. The sales motion also can have more momentum given you’re not selling to enterprise. Not saying there aren’t risks obviously, but most of this isn’t accurate.
Wholeheartedly disagree with a lot of this. Plenty of consumer brands grow extremely quickly. When done with sustainable unit economics, most of that results in attractive payback periods. Consumer also tends to be more corporate centric as well, compared to simply financial engineering towards a sale to another sponsor. This pushes multiples higher than a sponsor would pay. The sales motion also can have more momentum given you’re not selling to enterprise. Not saying there aren’t risks obviously, but most of this isn’t accurate.
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