Q: Vincent, what inspired you to found Cranemere?
Vincent: A lifetime in finance and building businesses has taught me that, in an increasingly complex and uncertain world, among the best ways to create value is to own outstanding companies for the long term.
The traditional private equity structure requires that you sell those businesses within three to five years, regardless of whether that’s the right decision for the business. In fact, many of the industry incentives encourage selling the best businesses quickly. That doesn’t make sense! Selling a business incurs substantial costs and is a significant distraction for management. For the private equity firm, it creates the problem of having to buy a new and equally good company when you have just sold an excellent business you knew very well.
Not only that, when you have a short-term mindset, commitments to innovation, expansion and the well-being of people and the environment are too often neglected – weakening both the businesses and society.
Cranemere was established to solve this problem. We have permanent capital in a corporate structure that enables us to focus on the best strategy to create value over the long term and aligns the incentives of shareholders, management and the companies we partner with.
Q: Jeff, what motivated you to join the firm?
Jeff: While serving as the Director of the National Economic Council in the Obama Administration, I led an effort to identify policies to promote a longer-term outlook among business leaders. We were concerned that many CEOs are too focused on short-term performance, and were foregoing long-term planning. Absent long-term investment in areas like R&D, workforce development, technology, manufacturing expansion and the sustainability of supply chains, companies risk undermining their own growth and competitive advantage. The health and progress of the overall economy suffers as well. As we studied the issues, I came to believe that the most promising models for encouraging long-term value creation would come from the private sector.
When I left government, I continued to push on the question of “Which firms are leading the innovation in long term value creation?”, and the best company I found was Cranemere.
Q: What attracts companies to the Cranemere approach?
Jeff: To put it simply, we aim to be a trusted partner with the means and capabilities to continue to build the strong companies of today into outstanding companies of the future. The companies we partner with are market leaders. They have developed a better product, or better business model, or both. They are superior at execution and have a high-performing culture. To capture the opportunities ahead, these companies are very attracted to a different kind of partner than the traditional alternatives — one that is focused on their long-term priorities, can bring global reach, and has the business building expertise and balance sheet to enable their next stage of growth. At Cranemere, our sole objective is to create more value, measured over decades not quarters. We don’t distract management with the need to sell their businesses or raise capital. We don’t overburden businesses with debt. We don’t impose bureaucratic approval processes. We look to protect and advance the legacy and values of our partner companies because we know that’s central to what drives distinctiveness and competitive advantage. We employ a collaborative approach to decision making and we ensure that our model provides equivalent or superior management economics, relative to other alternatives, without forcing a premature sale of the business.
Q: How is Cranemere leading the innovation in long term business building – what is it about Cranemere that is different to other approaches?
Jeff: Our strategy and structure are distinctive and, as far as I can tell, nobody is doing it quite this way. Of course, buying businesses for the long-term is not new; Warren Buffett has been doing it for decades. Cranemere has taken this theme and, starting with a blank sheet of paper, established an approach that marries the discipline and process of a top tier Private Equity firm with the benefits of long term strategic partnership, global reach, and business building expertise in a transparent and aligned structure for shareholders.
Vincent: Now that we have a few years of experience with our new approach, my colleagues and I are seeing that the opportunities for us are bigger than we had anticipated. We have found there are many excellent privately-owned companies that are looking for a long term partner like us who is committed to growing the business in a thoughtful and strategic way, working collaboratively with management. In many cases, these are situations involving founders or families who are going through an ownership transition. Many of these business owners didn’t know a company like Cranemere existed and it has been very satisfying to engage with them to explain the power of our approach for meeting their needs.
Q: One of your principles is “Business is a force for good.” What do you mean?
Jeff: We believe that building great companies of enduring value and promoting the wellbeing of people, the environment and our communities go hand in hand. Sustainability is therefore an integral part of our strategy – from enhancing our diligence processes to driving value creation in our companies. Population growth, depleted and stressed natural resources, climate change, increased demand for food, water and energy, and rising demand for healthy and natural products are creating long-term opportunities for companies that are proactively and directly addressing these challenges.
We’re actively engaged with our operating companies to identify the intersection of where sustainable business practices can lower costs, reduce enterprise risk, drive innovation, enhance workforce engagement and ultimately contribute to strengthening their competitive advantage and resiliency. Our long term horizon enables us to meaningfully commit to and capture value from employing sustainable business practices, going beyond the limited impact of more traditional corporate social responsibility programs.
Q: In time, what do you hope Cranemere is known for?
Vincent: We aspire to build a firm that will be admired for generations to come: to serve, with a lasting commitment, all our stakeholders – from the companies we own, to the people, environment and communities around us, and ultimately, to the shareholders who have put their trust in us.
Jeff: That we have pioneered a new and better way to building businesses over the long term. I absolutely believe that our early success, structure, team, acquisition philosophy and governing principles provide the wind at our back to achieve this outcome!