Lesson 3 from the recession: If you follow lessons 1 and 2, recessions can create great opportunities for growth and value creation.
Recessions eliminate the weak and reward the survivors. The weak generally are overlevered and are spending their time and significant dollars appeasing their debt holders. The strong, by contrast, are appropriately capitalized and well run. They are poised to bring in more work and to acquire other companies.
There are many companies, including our portfolio companies, which have thrived during the recession. These companies are growing revenue and EBITDA and are taking market share. They are accomplishing this both organically, often picking up business from failing competitors, as well as through acquisition. Those acquisitions often are of struggling competitors at very advantageous valuations.
Follow these lessons, and your company will be positioned to thrive through down cycles, and to dominate once the market turns positive.
Dan Lubeck is founder and managing director of Solis Capital Partners (www.soliscapital.com), a private equity firm headquartered in Newport Beach, Calif. Solis focuses on disciplined investment in lower-middle-market companies. Lubeck was a transactional attorney and has lectured at prominent universities and business schools around the world. Reach him at [email protected].
