The Triple Win: What really matters in business and in baseball
This interview takes a unique peek into the key success factors of investment partnerships. They don’t all work the same so find out what really matters.
Many private firms seek investor resources to fund a transaction, a transition, or a new growth trajectory. One popular source is private equity funds. In many cases, these are funded by a collection of investors with a certain expectation of return on investment within a given period. Each investor group often works within their specific industry space or expertise. “We don’t consider ourselves a Private Equity partnership,” says Tim Dunn, Chairman and Chief Investment Officer of JE Dunn, on his relationship with Terry Matlack, Co-Founder & Managing Director of VantEdge Partners, recent purchasers, along with management, of a residential external building contractor in Minneapolis. “We don’t put a limited time horizon or a specific return on the table. We reach out to partners where we understand the industry, and work with our partners to define value in multiple ways, sometimes in ways that others don’t appreciate.”
Key Questions to Ask
For organizations interested in private funding, there are some key questions they should ask before committing to a specific firm. Terry Matlack emphasizes the need to be aligned on strategy because it has such a big influence on investment and human resources—what is needed to grow is dictated by how a company expects to grow. He also thinks shared values are key, “You need to share a view of the world, on how you treat people and customers. Sometimes softer things can be more important than everything else,” says Matlack. Dunn agrees, “You have to ask if you will enjoy doing business together whether things go horribly bad or extremely well. Culture, ethics, values and strategy are key.” In Dunn’s experience, it is harder than it sounds. “Finding good values is harder than you think. Too often we find leaders who say the right things but don’t back it up with actions. And it starts at the top. It is all about the execution,” says Dunn.
What Sets Them Apart?
When Matlack is asked what sets them apart he explains, “One of the things that may make us different is that we are not focused on the short term, but rather long-term value creation. We do want to achieve results, but we can be flexible in structure and solutions and how to invest over time. We are not meeting established investor criteria or guidelines like some PE firms must do.” He elaborates, “In this partnership, we have two investor partners along with the company founder partners. We prefer transactions where we and a small group of trusted partners control the transaction. So, lots of variety in our time frames, capital structures and partnership arrangements.” Dunn indicates that for him, since J.E. Dunn is an operating business first, they leverage their industry knowledge to invest in businesses they can help. “We are very flexible but picky about who we partner with. We provide long-term capital with others who want to grow enterprise value in cultures of accountability and transparency, and who are strong at executing strategy. We expect some bumps in the road. We are patient capital.”
Not every deal is a good deal for Matlack and Dunn. Their current partnership is a “dream team”, according to Matlack, because it unites a co-investor with industry experience and a management team they both like. “We look for those situations, but they are rare and getting harder to find. Today there is a much higher velocity of deals with many more competing buyers.” says Matlack.
The Definition of Success
Matlack and Dunn absolutely agree on the definition of success; it is a “triple win.” Matlack elaborates, “We want everyone to win, from customers, to employees and to shareholders. Even the government wins from a tax revenue perspective. That is when you can have some fun as that is what matters.” Dunn explains it this way, “You want to look in the mirror and be proud. It is not about hitting a certain number in a certain year.”
Interestingly, Matlack and Dunn are both part of the new Royals owner team led by John Sherman. They both acknowledge that they are in the deal because they love baseball and Kansas City. They would like to see a triple win here too—for the players and the community, not just the owners. What are some of the unexpected challenges that come with being MLB owners? “Well, winning,” says Dunn, “If we aren’t winning it hurts. We are die-hard Royals fans and committed to seeing Kansas City shine.” Matlack adds, “It is a complex and competitive business –not only are we competitive with other teams but we compete against other types of entertainment. And we do so in a small economic market. So, we just have to be better. We proved we could do it in 2014 and 2015. Now we just need to be more consistent.”