Lesson #2: Know When to Hold ‘Em and Know When to Fold ‘Em
Lesson #2: Know When to Hold ‘Em and Know When to Fold ‘Em
Labatt executives, dissatisfied with Schwartz’s style of business, secretly sought another bidder to team up with. After finding a Belgian brewery that was willing to pay $2.7 billion for the company, outdoing Schwartz, the deal was sealed. To this day, Schwartz calls this failure the biggest disappointment of his career. “It hurt,” he says.
While Schwarz might have regretted listening to outside investment bankers and walking away from the deal instead of upping his bid for Labatt, his colleagues on Bay Street saw the move as a shrewd one. From there on out, Schwartz gained a reputation for being disciplined and knowing when to walk away. Schwartz could have been stubborn and proud, refusing to lose out to a higher bid. Instead, however, he chose to assess the situation and determine whether it was worth the extra investment. In the end, he decided it was not.
Instead of walking away with his head down, Schwartz looked for the next investment. After consulting with his colleagues and shareholders, he decided to offer IBM $750 million for its in-house parts manufacturing and service division. Today, that division of IBM is known as Celestica Inc., and indeed, thanks to Onex’s management, it has added new business branches and gained additional customers to become the number three company of its kind anywhere in the world.
Over his long career, Schwartz has come to recognize that there will always be another deal. Success, however, only comes from investing in those that he has sufficiently investigated and deemed appropriate. Because of its impressive stature, Onex is now informed about whenever any major company comes up for sale anywhere in North America. Schwartz and his team then inspect the books of each company and their respective markets to determine their futures. Schwartz is also keen on finding his own potential acquisitions, ones that have yet to be advertised and that are hiding in their larger parent companies.
Schwartz’s patience was again tested in the late 1980s. Until that time, he had been acquiring new companies at a rapid rate, but all of that soon changed. The leveraged buyout market was in a frenzy, but while others took action and got in on the craze, Schwartz stayed still. In fact, it is estimated that during that time, Schwartz turned down more than one hundred potential acquisitions. Of the experience he said, “We take an excruciating length of time to buy an asset. We did nothing in the late 1980s because of all the pressure to do deals. That’s not our game.”
Lesson 2 Know When to Hold Em and Know When to Fold Em
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In 1995, Schwartz embarked on one of his most ambitious business deals to date, and one that would forever haunt his career. That was the year Schwartz decided to put in his bid to buy the John Labatt Brewery. He had even been successful in persuading the Ontario Teachers’ Pension Plan Board to support his $2.3 billion bid to takeover the popular beer company. But Schwartz would not experience the smooth sailing he had predicted.
Labatt executives, dissatisfied with Schwartz’s style of business, secretly sought another bidder to team up with. After finding a Belgian brewery that was willing to pay $2.7 billion for the company, outdoing Schwartz, the deal was sealed. To this day, Schwartz calls this failure the biggest disappointment of his career. “It hurt,” he says.
While Schwarz might have regretted listening to outside investment bankers and walking away from the deal instead of upping his bid for Labatt, his colleagues on Bay Street saw the move as a shrewd one. From there on out, Schwartz gained a reputation for being disciplined and knowing when to walk away. Schwartz could have been stubborn and proud, refusing to lose out to a higher bid. Instead, however, he chose to assess the situation and determine whether it was worth the extra investment. In the end, he decided it was not.
Instead of walking away with his head down, Schwartz looked for the next investment. After consulting with his colleagues and shareholders, he decided to offer IBM $750 million for its in-house parts manufacturing and service division. Today, that division of IBM is known as Celestica Inc., and indeed, thanks to Onex’s management, it has added new business branches and gained additional customers to become the number three company of its kind anywhere in the world.
Over his long career, Schwartz has come to recognize that there will always be another deal. Success, however, only comes from investing in those that he has sufficiently investigated and deemed appropriate. Because of its impressive stature, Onex is now informed about whenever any major company comes up for sale anywhere in North America. Schwartz and his team then inspect the books of each company and their respective markets to determine their futures. Schwartz is also keen on finding his own potential acquisitions, ones that have yet to be advertised and that are hiding in their larger parent companies.
Schwartz’s patience was again tested in the late 1980s. Until that time, he had been acquiring new companies at a rapid rate, but all of that soon changed. The leveraged buyout market was in a frenzy, but while others took action and got in on the craze, Schwartz stayed still. In fact, it is estimated that during that time, Schwartz turned down more than one hundred potential acquisitions. Of the experience he said, “We take an excruciating length of time to buy an asset. We did nothing in the late 1980s because of all the pressure to do deals. That’s not our game.”
Lesson 2 Know When to Hold Em and Know When to Fold Em
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