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Wait years, then go full bore
Quiet years, fast years
The businesses most admired for this, such as Danaher and Teledyne, don't get fusty during the quiet stretches. They aren't opening new stores or doing a bunch of M&A for two or three years. When the markets open, they are completely comfortable putting the foot down on the accelerator and going full bore.
A fund can't operate that way, and a holding company can. Discount Tire, where Beacon's founder sits on the board, is another example.
Beacon's moment
Beacon's founder first told his wife the company would go super slow. The holding structure ended up letting it go fast once the opening appeared. Beacon is at one of those moments right now, and that is why people walk quickly down the hall of its office.
How did Danaher build its acquisition record?
Danaher began in 1969 as a real estate investment trust and, under brothers Steven and Mitchell Rales, turned into an industrial company that grew through acquisitions. In the 1980s it developed the Danaher Business System, a method of continuous improvement. The company applies the system to businesses it buys after closing. The Danaher Business System borrows from the Toyota Production System.
Why can't a fund wait years to invest?
Private equity and venture funds typically have a fixed life of about ten years, and the investment period is often the first five. Investors commit capital with the expectation that it will be put to work in that window. Fees are commonly charged on committed capital during the period, which adds pressure to deploy. A holding company has permanent capital, so it has no deadline.
How did Teledyne's founder time his moves?
Henry Singleton co-founded Teledyne in 1960 and bought well over a hundred companies during the 1960s. In the 1970s he largely stopped acquiring and repurchased shares instead, buying back roughly 90 percent of the company's stock between 1972 and 1984, according to William Thorndike's 2012 book The Outsiders. Singleton remained chief executive until 1986.
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