Tracy Britt Cole spent a decade working for Warren Buffett. Now she wants to acquire the kind of companies that were of interest to the renowned investor 30 or 40 years ago.
These are companies that are usually run by founders or owners who are family members and have a solid performance and a competitive “protective channel” – a favorite expression on Buffett – but are not large enough to attract Berkshire Hathaway’s attention today.
“Berkshire needs billions of dollars in purchases to move the needle,” says Cole. “So a lot of the people who contact us or want to sell would want to sell to Berkshire, but they’re just too small.”
Cole launched an investment firm with a former colleague in 2020, called Kanbrick, which aims to focus on such companies. In the meantime, the company has acquired Thirty-One Gifts, a company from Columbus Ohio that sells canvas bags, schoolbags and other items through independent consultants. Kenbrick works on investments with home service companies and consumer brands.
Choosing the right companies takes time and before buying a company, says Cole she and her team usually sit with the founders and try to understand not only the basic components of the business but the people working in it and the strategy, hoping to answer the question: “What might be the challenge here ? ” Says Cole.
In order to meet founders, they have put together in Kenbrick a three-month program for medium-sized companies that provides additional training and support; Meanwhile, Cole and her colleagues have worked with 15 companies, including a large farm in Arizona that sells melons to large retail chains.
From the Kansas farm to Buffett’s fire truck
Cole, 37, grew up on a family farm in Kansas that moved agricultural produce throughout the Midwest. She attended Harvard Business School and joined Berkshire in 2009 at the age of 25, initially working as Buffett’s financial assistant.
She was later appointed CEO of Berkshire Cooking Products Company, Pampered Chef, and on the way did other tasks within Berkshire to help struggling companies. She served as chairman of Berkshire companies such as Benjamin Moore & Co. and Johns Manville, and served on the board of Kraft Heinz And others.
In an interview in 2019, Buffett called Cole the “firefighter,” praising her ability to revive friendships and take on any task she needs.
Cole recently spoke with the Wall Street Journal from her home office in Nashville, Tennessee. Here are some parts of the conversation:
What made you decide that such a model was needed?
“Over the years, I’ve talked to a lot of founders and company owners, some of whom would come to Berkshire and try to sell their companies; other people I met through organizations. , How to help them grow, how to build strategy.So what we did is we built a business system to help in these areas, and it really allowed us to create value for companies.
Many families and founders do not want to sell the companies to private investment houses. They do not want to see their companies bought and sold or cut and the employees fired. We can give them a hostel for a longer time, and help them build in the right way. ”
What kind of companies are you focusing on?
“We want businesses that have already been around and are successful and strong, but have a protective channel that allows them to have above-average capital returns. Smaller companies that bring in $ 10 million to $ 50 million [בהכנסות לפני ריבית ומיסים] They are about our sweet spot in terms of size. They are beyond the stage of new growth, but are still not really considered big companies.
These are usually family companies or companies owned by the people who founded them. We have many conversations with families, founders who are looking for partners, or want a longer-term hostel but may not think that a strategic investment house or private securities is the right place for them. ”
What is different about your approach compared to private capital?
“First of all how long do we own companies. Most private equity firms own companies for three or four years. If you are going to own a company for three or four years, once you buy it you are already thinking about selling it, and every decision you make is focused on: what I Are you going to do to sell this company? Much of the investment you put into the business does not pay off in three or four years, so I think a farther horizon is extremely valuable.
Most people in private capital usually have a financial background. Both my partner and I started our careers as investors but thought it was very important to have operational experience.
I became the CEO of Pampered Chef, he was the CFO, really with this goal: how to become better at what we do? And I think that having this operational experience helps us make better decisions, understand what is possible in the business, what is needed. Then we Can connect to the founder or owner or CEO of any company because we were in their shoes and we know companies are not managed in the datasheets and presentations, right? “.
Do not deal in real estate
So how do you choose your companies – and which industries do you avoid?
“There are things we will not deal with. We do not deal with real estate. We do not deal in the finance industry. We do not deal with biotechnology. These are just areas where we do not have the expertise, the insight, and we are not going to be better than anyone else. Then there are many other industries where we have a lot more experience and things are interesting. These extensive industries are services to businesses, industry or consumer companies. But within that there are hundreds of sub-domains.
So we spend time looking at a lot of different companies and really say: Do we think this is a really good company? Do we think she’s going to continue for 10, 15, 20 years and not be disturbed by someone else or by technology? Then, thirdly, is this an area where we can add some meaningful insight or perspective? “.
You focus on medium-sized companies. How are the challenges these companies face different from what large companies experience?
“People and culture are always – in my opinion – the number one issue for any society.
How do we attract really talented people to my company? Maybe I’m in a rural part of Minnesota or Missouri or something. How do I help people understand why they want to join my girlfriend who has never heard of it? Everyone has heard of Procter and Gamble, Coca-Cola. People have not heard of most medium-sized companies. Then, once I have them in the organization, how do I develop them? Because it’s not like I have hundreds of thousands of jobs; I have maybe a few hundred jobs. So I need the right people, but also to show them a career path. ”
There is no specific result that Kenbrick wants to achieve
What is Kenbrick’s long-term plan? Do you want to trade on the stock exchange?
“We do not have a specific outcome in terms of what we want to achieve in an IPO or in any other way. It really is: how do we build it the right way? Then how do we add value to companies, our staff, our investors, and help everyone while we do it?”
How did you found Kenbrick?
“It’s a combination of our capital and a select group of investors, funds and family firms that are our partners.”
There seem to be a lot of similarities between Kenbrick and Berkshire – focusing on the long term, defensive channels, even writing an annual letter last year like Buffett. How is it different?
“Berkshire is very successful, so being similar to Berkshire is a very good thing, in my opinion. I would say we are different in two dimensions. First of all there is the size. We focus on much smaller companies that are just too small for Berkshire. There I think is the biggest opportunity “I left to set up Canbrick. The second difference is that we are more involved. Berkshire is famous for its non-intervention.”
Did Buffett give any advice that stuck with you while you were building this company?
“It’s hard to refine it because there are so many lessons from my time at Berkshire and working closely with Warren over 10 years. I just think about the power of the long term, the power to find good quality companies and the power to partner with high quality people. When those three things are done properly “You can build something truly amazing.”