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Will your business dodge the next “Black Swan”?

Whatever the downsides of lockdown (and there are many), one of the advantages is that it does provide the time to review and reflect on the past. For the founder of a business remembering those first exciting days as a start-up and the subsequent trials and tribulations of building a business, provide both a rich vein of dinner party anecdotes, a sense of achievement and inspiration to face new challenges.

Those entrepreneurs, who like the founders of KCP, established their business in 2007, will probably feel that they have packed a lifetime of trials and tribulations into just thirteen years. For starters, there’s the largest financial crash since the second world war. Just as we were shaking that off the UK voted to leave the EU, leading to two years of political turmoil and heralding the most significant change in the UKs international trading position since 1973. Brexit isn’t even complete and now we face the largest global pandemic for a century and an unprecedented shutdown of large swathes of the world economy. Don’t think about what could be coming next – you’ll just upset yourself.

Without wishing to appear immodest, we think that if you are one of “The Class of 2007” you are entitled to allow yourself a self-congratulatory smile, accompanied by a quizzically raised eyebrow toward your appalling sense of timing, before turning back to address the challenges of todays “once in a lifetime” crisis.

For KCP, one of the key ingredients of our success has been our ability to diversify our investing across a variety of sectors. Over the last twelve years, we have invested in a multitude of business operating in areas as varied as school dinners, soups and sauces, healthcare, virtual reality, advanced plastics and online retail. Most businesses don’t have this luxury. To be competitive as an SME, you need to be expert in a sector and focused on providing the best possible product or service. Being a “jack of all trades” wouldn’t have got you to where you are today.

While good business, this strategy does leave you vulnerable to events outside of your control that impact your entire sector, or even the entire economy. It is not unreasonable to be concerned that the next “black swan” (apparently not such an exotic bird anymore) could have your name on it and damage or destroy your hard-won gains of the last thirteen years.

If you do have these concerns, then KCP can help. We have done a number of deals where we have purchased minority interests in businesses, leaving the founder with a majority stake. This enables the founder to bank a proportion of their gains to date while remaining at the helm.

We are actively seeking more deals like this. If de-risking in this manner is something you would like to learn more about, please don’t hesitate to get in touch with us.

Posted in All, Blog on Jun 02, 2020