Bought to keep

The question we are asked most often, by owners and by people who look at this from the outside, is the same one: if you buy good companies, why would you never sell them? The reason is practical: selling is expensive, in ways that rarely show up in the numbers.

A company that is being prepared for sale starts to behave differently. Investment that pays back over five years gets deferred, because the buyer will not pay for it. The people who might have been promoted are kept where they are, because the organisation chart is easier to explain unchanged. Everyone senses it, and the good ones start taking calls. None of this shows up in the accounts, but all of it costs.

Not selling removes the deadline, and with it most of those distortions. A roof, a van, an apprentice or a second branch that takes three years to pay for itself become ordinary decisions, not arguments. Over the years, the sum of those decisions is what makes the difference.

Permanence costs us something, and we would rather say what. We rarely win a competitive process on price, because the highest price is usually paid by whoever has the shortest horizon. We have to be right the first time, since there is no exit to correct a mistake with. And we are slower: we would rather lose six months than buy a company we would not want to own in twenty years.

For the owner, it means the people stay. Someone who spent thirty years building a company can step back without watching it be taken apart to make a return, and can still walk into the yard afterwards.

We will write these letters when there is something worth saying, with no fixed schedule.

Pedro Teixeira Duarte, President · Manuel Oliveira, CEO

More letters are here. If you are an owner thinking about what comes next, here is how a sale works.