Stewart Kohl’s M&A advice today is similar to what it would always be:
“Focus very intensely on the micro,” says the co-CEO of private equity firm The Riverside Co. “Every deal comes down to one company, one management team, one strategy, at one time.”
While the dealmaking conditions of the Great Recession and the pandemic are different, he says many of the deals the private equity firm did during the global financial crisis — letting that stand in generally for any time of market uncertainty — turned out to be very good deals.
“But they did not because it was some big macro thesis about, now it's just a great time buy companies so we’re going to buy anything,” Kohl says. “It always came down to the right company, right management team, right strategy at the right time.”
There are parallels that can be drawn between the two tumultuous times, and always lessons that can be learned. But that doesn’t mean the people working through the difficulty have clarity or even make the best decisions amid the uncertainty.
Regarding the Great Recession: “The government eventually figured out its role, and particularly the Fed and its role, in getting us out of the crisis,” Kohl says. “But it took a long time to do that. Along the way a lot of people freaked out — that's the technical term when people do things that later look uneconomic; they sell too cheaply and they don't make these decisions to buy things they should have.”
M&A since then has grown. And within the industry, dealmakers have grown, too. He says the junior-level people who had to navigate the ’08 recession’s uncertainty with little modern market history to guide their decisions are likely leaders of the institutions making the big decisions through the pandemic-induced uncertainty.
“There's much less freaking out,” Kohl says. “People feel like, been there, seen that, done that, watched what happened, and realize that the things we sold quickly for silly prices we're terrible decisions, realize the decision not to buy anything for a while was a terrible decision.”
Kohl spoke on the Smart Business Dealmakers Podcast about portfolio company performance, Riverside’s M.O. as it navigates through the choppy M&A market, his sense of where the collective heads of buyers and sellers are at the moment, and more.
Listen to the podcast