Positioning Your Company as a Flagship Investment – The Often-Overlooked Qualities

By Brian Smith, Managing Partner

Introduction

In the competitive landscape of business acquisitions, positioning yourself as a flagship investment will set you apart from other businesses. Flagship investments stand out due to a variety of qualities that are often overlooked by business owners and CEOs.

In this series of articles, we will focus on five crucial, often overlooked qualities that can help position your company as a coveted flagship investment. These qualities are above and beyond the standard qualities that are expected of all high-quality investments, such as revenue growth, scalability, competitive advantage, profit margins, revenue quality, company culture, and market position. 

What is a Flagship Investment?

A flagship investment, from the perspective of a private equity (PE) firm, is the cornerstone or standout acquisition in their portfolio. It represents a prime example of the firm’s strategic vision and operational expertise. For business owners and CEOs, think of it as the PE firm’s marquee project – the business they proudly showcase to demonstrate their ability to drive growth, improve operations, and generate substantial returns. This investment often receives significant attention and resources, reflecting the firm’s best practices in enhancing value and achieving long-term success. Essentially, it’s the star player that sets the benchmark for future investments and attracts potential investors by exemplifying the firm’s capabilities and success.

Using a sports analogy as a way to illustrate the difference between an excellent investment and a flagship investment, we can look at Mike Trout, a cornerstone player for the Los Angeles Angels. Nearly all Major League Baseball players are exceptional and excel at hitting, fielding, throwing, and base running. Most also have demonstrated leadership skills, work ethic, and durability. We can look at these qualities as the previously mentioned “expected qualities”: revenue growth, scalability, margins, etc.So, what sets Mike Trout apart from all the other players? He consistently scores exceptionally high on the WAR (Wins Above Replacement) scale, often leading the league in this comprehensive metric. His WAR scores are a result of his elite performance across all facets of the game—hitting for power and average, stellar base running, and superior fielding abilities. Trout’s remarkable consistency and all-around excellence typically result in WAR values well above 8 or 9 in his peak seasons, a benchmark that signifies a superstar level of contribution and ability to add significant value to his team, making him one of the most valuable and versatile players in the history of Major League Baseball.

Mike Trout attributes his unique ability to perform at such a high level to his well-rounded and comprehensive approach to the game and to his training. He emphasizes continuous improvement, strong work ethic, and discipline in all areas of performance on and off the field. So, he is intently focused on the elements of performance that most players neglect or believe are of lesser importance.

While it may seem unrealistic to achieve that level of performance as a business, when you look at the number of MLB players compared to the number of businesses operating in the US, the task may not seem as daunting. Let’s assume there are 10 players at or near Trout’s level. Of the 1200 total players on MLB rosters, those 10 players represent the top .83%. Applying that percentage to the roughly 300,000 middle market businesses currently operating in the US, you would have to become one of the top 2,500 performing businesses. Seems far more achievable.

Even if you don’t get there, striving to get there can significantly enhance your appeal to leading PE firms and strategic acquirers and will undoubtedly distinguish your company from other potential investments. The demonstrated commitment to excellence and growth will likely result in a significantly higher valuation and an opportunity to partner with select firms that will honor the company’s vision and maximize its potential.

Qualities of Flagship Investments

In the articles to follow in the coming weeks, we will address each of the five following qualities of flagship investments:

1. Availability of High-Quality Financial Information

2. Overall Preparedness to Execute a Transaction

3. Depth of Leadership Team

4. Understanding of the Competitive Landscape of Potential Opportunities

5. Comprehensive Succession Planning

Be on the lookout for future postings, or message us if you’d like to be notified as the articles are published.

LCG Advisors is a leading financial advisory and consulting firm with headquarters in Tampa, FL, and Denver, CO, and services nationwide. Contact Katie Martinez, Director of Business Development , at [email protected], to find out how LCG can help make your business a flagship investment.