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Chris Mayer

lines on the record: 53
first: 2024-02-16
most recent: 2024-02-16
sittings or episodes: 1
sources: podcast

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“Sure. Well, thank you, Clay. It's always good to be on you. You always agree because we have good conversations. You ask good questions. So I enjoy it as well. Yeah, I mean, if people want to find me, you know, Woodlock House Family Capital is named my firm. And I write a very occasional blog, and I haven't really written it in a while, I know. There's a lot of stuff on there to read from the past. And I'm still active on, well, we used to be Twitter now X. And not as much, but I still will post things occasionally there. So those are two ways to keep up with what I'm doing.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“My friends at Impractice have done a lot of good work on serial choirs. That's a paid subscription, but they have a lot of stuff on all the names we've talked about, serial acquires. So that would be one. Definitely recommend that. You know, there's a free site called Acquires.com. You can check that out. There's a, there's a free book there that gives kind of an overview of the serial choir model. So I'd recommend that. You know, my friend over at Oddbjorn over to REQ Capital, they've just released within the last, what was it, couple months a huge mammoth 300-page slide deck on Cyril Aquires. So I definitely recommend that. So yeah, those should definitely, that's enough to chew on for anybody there, I would say those things start there.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“The ideal would be you get something that sort of takes over and you look at it, and it's 20, 25% of your portfolio and it's just kind of gone up 20x and you're delighted. So that's kind of how I think about it.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“Well, as a general rule, I don't trim, so it would have to be like really egregious. So that's number one. And even then, I mean, topic, as you could argue, got pretty egregious in 2021. I never sold it. But that's also because I didn't necessarily have anything else that I was pounding on my, you know, anything else that I was really wanting to buy. So, you know, sometimes it's dictated by what other opportunities there are. If I had something today that was like screaming by that I have to own, you know, I'd have to give some hard thought to whether I wanted to trim something else or where I would get the capital because right now I'm fully invested and I've been fully invested for a while. I mean cash has less than 1%. So it's not like I have room to do anything right now other than sell something first. So all these considerations come into play. But in the general rule, I think the source of outperformance comes from an investor's willingness to let something become a bigger part of their portfolio, let them really ride those winners. And if you do get something that...”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“10. So my positions tend to be kind of right now because the fund's still relatively young. It's only five years. The span between kind of those positions are like, you know, 8 to 12 kind of in that range. It's not like I have 3, 15%, 20% position, and then I have four or five, three percent positions. I don't have that. So the interesting question, I mean, that's the way I would think about it. First, just kind of looking at the position sizing and then kind of gauging attractiveness from there. And then, you know, it doesn't bother me to hold cash for a while. If I sit on cash for five or six months while I think about it, it's okay.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“Well, like first, I think about position sizing. So sometimes I don't mind using constellation here. I probably wouldn't add to it if I got fresh capital only because it's my number one position now and I think it's probably 12 or 13%. So whereas certain other positions are a lower percentage and perhaps just as attractive. So some of it is position size and kind of guides where that fresh capital goes, but then also looking out on that sort of 10-year model that we looked at where is the most attractive attractive place to put it. And there's always a couple that always that stand out as obvious places that I would put it that are well below kind of my thresholds on position sizing because there is some guardrails that I put in place for myself. I don't like necessarily push anything above 10% with capital. I'm perfectly happy letting it compound and if it gets to a bigger number, great, totally willing to do that. But as I get inflows, I don't like to push things above.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“40 50 differences between the hot you know it's a lot and just more than one year so and these are among the highest quality companies around so yeah you're gonna get chances”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“A surprisingly high number. Now, you have to be a little careful with that, right? You can't just willy-nilly start paying big multiples and thinking that you're going to get bailed out. But there are some companies that you do the work on it and you get conviction that they can repeat their formula over five and 10 year periods of time, then it should work out. And you collect enough of those, right? It's not like you have to make one bet. You can create a portfolio. You get 10 of these kinds of businesses. And that's the other thing when you do it on a portfolio basis, you're doing 10 of them. How many do you really need to work out just like you think? It's, you know, you get a couple, you're going to have, you're going to be very happy, especially if you let them just run and you don't cut back and trim your winners all the time, which is what another thing people tend to do to sabotage their returns.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, this is a great secret of long term investing in high, high quality businesses is that the compounding is amazing. I mean, you work it out on a spreadsheet. You can do 20%, 25%, whatever you want over five and ten years and see what those numbers are. And then you can kind of love what you did back in the multiple. I do that too all the time. I remember I did that for my investors in my investors on my fund, I use Copar, and I think it was 2022 because I went back to 2012 and I said, you know, What multiple could you have paid back in 2012 and earned at least, you know, I don't remember if it was 10 or 15% return that I use. And the multiple was really high. It was like 60 sometimes you could have paid and still gotten, you know, 15% return your money. That's what it was. And at the time, it was trading for 25. So Terry Smith does this too, you know, his letters. He'll look back at some of these great compounders and say, you know, what you could have paid, what the multiple could have been, and you still gotten a market return. And it's always.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“Number 10 years out, put a multiple on that. What's your IR? So you've got quite a bit of room to play around with those variables and adjust them along the way. But I think these are pretty attractive to own over a 10-year period of time.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“And they finished the year at 30. So that's dramatic. You might not get quite that swing. But for all these companies, you're going to get some chances. So there's two different ways. You know, I always say, like, if you really, if you love a company, you've done all the work. And for me, the hurdle rates are high for me to find something. So if I find something, I will start small, even if it's trading at 31 or 32, 35. And then you can always build it up later. But the problem is if you wait too much, sometimes it might go a year or two before you really get a shot. And then you would have been better off just buying it when you first wanted to buy it. So I don't get too, you know, I don't put too fine of a point on what the multiple is to that extent. You know, the way I think about it is this is a very simple model of, you know, they have so much capital today, earning a return on that capital. You forecast that out. How much are they going to reinvest of what they make? And you kind of, you know, you get a, you get a...”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“Well, I mean, taking those numbers at face value is 36 and 32. To me, that's kind of in the realm of the surrounding error. So I don't know that would be that much different. I also think that if you're a long-term investor in these, then the exact multiple maybe will fade in importance a little bit. And the way I think about it is I always think about things kind of like 10-year commitments. You know, you look out. And the basic math of it is if it's 25%, let's just say if it's 25% Kager, over 10 years, that's 9x. Think about that. 9x. So suddenly, and it doesn't have to be that number, you know, make it if it's 20%, it's, I think it's six something. So suddenly whether it's trading for 25 or 30 or 35 kind of doesn't take on as much of if you knew it was going to be nine times higher or let's say earnings were going to be nine times higher 10 years from now, you know, then I think you're not so much worried about whether you're paying 32 or 35 or 29. So that's the frame of refile.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“Yep, it's the same. And that's part of the big appeal too. So they're not handing out stock options and comp is the same. So it's something like 75% of the CE always bonus is used to purchase shares. And then those shares are locked up for three to five years. So I've always really liked that about constellation. When I think about incentive structure in my portfolio companies, constellation is the number one gold standard. And then the spin-offs are the same. So yeah, that's a big part of the appeal. That's exactly the kind of the things they focus on are the kind of things we focus on as investors, which is, you know, turns on capital and growth. And that's what we want.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, you know, this is another thing where, you know, again, like we talked about before, the larger deals in theory are going to have lower IRRs. But, you know, Lumine are doing these sort of quirky one-off deals. So it may surprise us. I mean, we'll have to wait and see. But I suspect with Luma and you're still going to get 25% type returns on capital in that business, you know, maybe even better with some of these.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“Could be. I mean, I also think you look at media and communications and there's a lot of these older median communications that are not really growing. And so in that sense, it's a very target-rich environment for a CSI type mentality to come in and redeploy those cash flows. So I think that's part of the appeal there as well. The other interesting thing is about Lumine is that David Nonlin and his team, they have sourced all their own deals. At least, you know, up to the time when I talked to them, maybe the last couple deals, maybe this isn't true. But, I mean, I think there's quite a bit of talent in that team also that I think plays into it.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, the deal, it's higher than what you would see typically for a CSI deal, but Wide Over is a very good business. They've got tremendous pricing power. I mean, it's a business that's involved with advertising for radios and TV stations, and it's not something you can rip out. I mean, it's really mission critical and functional to those businesses. So I suspect that, you know, because I know just culturally within CSI how they cling to those hurdle rates, I don't think that they lowered their hurdle rate on this deal. I suspect that they will get there or they must see a path to get there. And my suspicion is that it's in that pricing power and the stickiness of that business. So, you know, we'll have to see, but I think it looks like a very good deal.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“What kind of pipeline they have? I mean, they talk, we're talking about low thousands. Is their pipeline? And they're in touch with companies in the low hundreds. So again, this is a Luma owns, what? Less than 30 businesses today. So a lot of room, a lot of space to grow. And so I thought it was a really appealing setup and worth having its own real estate in the portfolio.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“As much competition. And so I thought that that would also yield lead to high returns. And David and his team have done this. So they know what to do. So actually the way it's played out is kind of the way I thought it might, which is you wouldn't see deals for a little while and then all of a sudden they would do something kind of sizable and interesting. And I think that's kind of what we should expect from Lumine. So it's really interesting because it's, again, it's constellation. It has the same incentives and the reporting is the same. So it's very similar. It feels familiar. But then they have this different tilt or bent. They have the specific vertical, larger deals, carve-outs. I think that's very attractive. And they have a lot of room. One of the things I've heard sometimes when I talk to people about Lumon earlier is they're like, yeah, well, you know, it seems like it's confined to one vertical and not as attractive. But it's an enormous vertical. And when you talk to them, David,”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, when I first looked at Luma and I remember talking to David Nylan, the CEO, and he kind of trying to suss out what the differences would be, how Luma would be different maybe than Constellation. And one of the things that appealed to me about it was this idea that Luman would do would have a heavier weight or tilt towards carve-outs. Now, I know that's not the technical definition of a carve-out.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“When you look at it, it's maybe not the best focus for that management team. But topic is figured out a way to do it. So it'll be interesting to see if they can keep that up and if some of that knowledge base translifers over to Constellation, I think maybe some of it has. I would be curious to hear what Mark says on that because the Constellation's organic growth, as we've talked about earlier, has, I think, been pretty strong, stronger than most people would probably have guessed, you know, 5% plus in the last few quarters of last year.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, this part of the original appeal of Topicus is that they had this higher organic growth, and it is higher. I mean, it's probably run like, you know, six to eight percent and higher when you look at, yeah, it's higher, six to eight. And I would say like the maintenance recurring, the key piece is probably 8 to 9. And I think in third quarter, it hit 11. So I mean, the model works better, it's easier when you have that organic growth, right? It's just kind of the math. It makes it easier to compile when you already start with your base assets or going 10% a year or whatever. So that's always been part of the appeal and why that is, you know, I think that's, I think Mark Leonard's talked about that. It's one of the things they want to learn more from Topicus, how they achieve that organic growth. I think it comes down to being focused on it. We've talked already a lot about incentives on this interview, but from my understanding as constellations incentives, you get paid for deploying capital, making deals. And at least traditionally you haven't been so much paid to create organic growth because create organic growth requires attention and expense.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“Raman participates in the annual meeting that Constellation has, and sometimes our questions put his way, but you don't get a lot and management doesn't really talk to investors. So these are kind of the hurdles and things that if I could change a little bit about topicus, I would go in that direction. I don't think they have to go to so far as to hold quarterly calls or do that, but I would like to see maybe topics hold their own annual meeting. Or like I said, an annual letter from the shareholder, CEO to shareholders. So if I had to say what I didn't like about it, it would be along those lines.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“Well, I mean, if I had a complaint about topic, because it would be I wish they could be a little more accessible, let's say. I'd love to see like, you know, Robin the CEO write an annual letter to shareholders, you know, kind of giving us the lay of the land from his point of view. You know, I think in general, I think sometimes the complexity of topicus keeps shareholders away. There's kind of a little bit of a bar you got to get over. If you're not familiar already with constellation, there's kind of this kind of bar you got to get. It's almost like Marcus designed it so that there's this hurdle you got to get over to be a shareholder. You know, it's not so easy. I guess it kind of works because it attracts a certain kind of shareholder, right? You know, you're not going to get someone who's just looking to make a quick trade because you have to put so much work and understanding it. There's some accounting things that have been bizarre, you know, the way the deals have been structured. And like I say, you don't get a quarterly earnings call. Manchin's not doing road shows. They don't have a nice little presentation, all these things investors love to digest. You get a very simple public disclosures.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“25% return on invested capital and then reinvesting everything, and you throw in some organic growth and you've got a company that could compound free cash flow per share 30% a year for years. So that's the basic attraction. And you're doing that in a business without leverage, without it's not cyclical, it's very sturdy, generates a lot of underlying cash. You know, you've got great incentives, same incentive structure, constellation carries over, telepathus. You don't have to worry about dilution. Another great thing about constellation, you know, share count stays the same. You don't have to worry about necessarily them doing something really dumb with a lot of life. So there's ways these companies get in trouble. I think you're pretty safe there with topics. So that's the appeal. And it's a little smaller. So like we said, the runway in theory should be greater.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, I'm intrigued by the whole thing. I mean, in some ways, we talk about Constellation 2.0. I mean, topicus is the next kind of little constellation. I mean, it's constellation, but in Europe. And a friend of mine pointed out to me by email that Topicus today is the same size as Constellation was in 2013. So if you”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“I think that stock got kind of caught up in that wave. I held it the whole time through. So I wrote it all the way up. I remember at one point and maybe I was up 140 some percent. And then I wrote it all the way back. And eventually I think it did touch my cost basis very briefly. So it's been a wild ride. But if you look at the overall Kager return that I have since I bought it, it's been good. It's been decent. I've used those times to acquire more. So yeah, I think the journey for those has been a little different. the spinoff dynamic i think definitely happened more with luma and because that started trading again if memory serves it was like 17 out of the gate and over the next several weeks it fell to like 14 you know think about that and then it finished a year over 30 so quite quite an opportunity that was”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“Think with constellation, it's maybe a little different because Constellation's shareholders, I think it's a little different. Like with topics, I don't think you saw a lot of that dumping early. And you can see it in the volume. I remember doing this. This was, I saw the numbers might be wrong, but I did this at the time. When you looked at like the first 10 days of trading a topic, maybe it was like 15% of the shares traded of those shares turned over. So a lot of constellation shareholders kept it. And because Topicus was pretty sizable, even out of the gate. But Luma, it was different. Luma, it was like more than 50% of the shares traded hands in those first 10 days because it was a lot smaller. And so I think even some of the large constellation shareholders were just dumping it because it was just too tiny, too small. So I think that plays into it. You have a little bit of a different dynamic that way, which makes interesting. And with Topic SU, that was in 2021. I think it spun off in February. If you remember 2021, I mean, software and tech and stuff got, yeah, it was a very kind of a little bit frothy. And so.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“Special situations, yes. And I think in the future, we will see more spinoffs. I mean, when I've talked to people there, yes, and it's unequivocal, there will be more spin-offs. It's just kind of what it will look like. I think it will look more like Lumine. It will be those kinds of spinoffs. It'll be part of a larger deal, and that will be the natural time to spin off something by itself. That's what I suspect. And I think Jamal, the CFO at Constellation may have said this at some point, that they're not likely to just take like, you know, Harris and spin it off as its own one of this operating groups and just spin it off on its own. It's more likely to be a specific vertical. And my guess is that it will be a specific vertical in conjunction with some kind of larger transaction, like with Lumine. That's my guess.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“I think they can still do that. I mean, they have the way constellations database works is my understanding is that if you have a certain target and you're in contact with that group regularly, it stays. It can't be poached by another group. But if you did lose contact with it, I think contact means having a meaningful conversation within a year, then it's open for anyone. I think Topicus has advantages in Europe because they're actually there and there's intricacies about that market. There's different obviously different rules and regulations for different European countries. There's different languages. And so I think Topicus has an advantage there. But I don't think that it means constellation can't do deals in Europe. Same with Luma and I mean, when I talk to David Nylin about it, he's pretty confident that he's got a good lock on media and communications in that industry. But I suppose if another CSI group had a median communications deal and they sourced themselves, then they can do that.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“So, I think I've also heard that Luman was an experiment in a way for David Nylan to kind of run his own thing. He's the CEO of Luman, and he wanted to do that. So those are some of the reasons I've heard. But there are interesting differences, and it'll be interesting to see how they kind of play out over the next five, ten years because Topicus can go across any vertical, but they're more supposed to be confined to Europe. And then Lumine is confined to one vertical, but they could go anywhere. So you have two different wrinkles there in how those play out.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“Well, I mean, I think Entopicus case was an experiment, partly an experiment with incentives like we talked about before. I think it wasn't natural there because Constellation also didn't own 100% of it anyway. There were sellers still owned a large block, so it was kind of a natural. My understanding is that they were kind of their own little castle over there anyway. But I keep hearing people refer to it as an experiment to see if what constellation might learn. There are some differences. Topic is organic growth rate, for example, is higher or has traditionally been higher. So I think that's part of the motivation with Topagus. And when Lumine maybe was a little different because Lumine is more is tied toward one vertical median communications, and that's spin-off came off a transaction they did with wide orbit, pretty sizable transaction for that group. And it allowed the owners of wide orbit to kind of roll over their shares into this thing and probably made the purchase price work there.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“That's right. You know, that reminds me when we talk about constellations gain. You know, sometimes you have to include the spinoffs in there. It's even better.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I remember when I first heard the 100,000 number, I was surprised too, but then I kept hearing it from different people who, you know, used to work at CSI. They'd keep putting that number. One person even said it was 200,000. I don't know, but it's a big number. And when you, you know, they acquired what? Was 100 companies in 2022? So suddenly it puts that all in perspective. There's a lot. And part of it is, you know, there are new companies being added to that pool all the time too. So new software companies being created all the time do all kinds of things. And it's, I agree. I mean, it seems like it's a huge number, but I mean, it's real. They think about, you know, for every different business, there are potentially who, you know, how many different software potential software packages for that business, you start to think about it across all kinds of geographies, it's a big number.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“Outside of VMS, it may be a bigger way. And part of that, I mean, you just have to, given there are long track record, thoughtful capital allocation, I feel pretty good. It's not going to be something dumb that we're going to wake up and go, gosh, why'd they do that? So, yeah, I'm really interested to see what they did. And they may not find anything. It may just be the constellation 2.0 is what we see today, which is that they do. They still do these little tiny VMS deals, but they're also deploying sizable amounts of capital in things like optimal blue deal and other things like that.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, among constellation shareholders, this is the talk what's Constellation 2.0 look like? And I think we've gotten a preview last year. We've seen them deploy bigger deals and do bigger deals, more complex deals. You know, will they drift outside of EMS? I mean, I think they've already done it to a degree. I mean, I talk to people, former CSI people, and they already own companies that are not really true, you know, VMS. They have some HMS. They have something that more service oriented. So I think in some ways they have crept a little more into adjacent software. And then I think it was in that last letter where he wrote about how they looked at a deal, came close to doing a deal that was oil and gas related and where the motivation was more taxes or something like I'm sure it would have been a really interesting deal. But that was, you know, that was certainly something beyond VMS. So yes, I would say you have to be comfortable with this potential drift to be a shareholder today because I think that they will eventually do something else.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“I've heard people say that when those concerns are voiced, Mark Leonard and the senior execs basically have this line where they tell them that, you know, evens out over the long run. And, you know, it's kind of think more like dollar cost averaging, sort of. So, well, so far, you know, it's worked very, very well because I'm sure there's lots of times. I mean, even recent years, you know, me owning it my fund, how many times people have told me it's expensive? So far, it's worked out.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I think it's a concern from the comp perspective, like in its compensation, if you're suddenly, if what you do has your compensation is tied more toward the overall, then that could be a problem. But I think that constellation spends a lot of time thinking about this. Mark Leonard certainly has mentioned it. This is the biggest challenge with them getting so large is how do you incentivize teams and keep it so that what they do, they still have a big impact and can still do well for themselves. So yeah, that's something to always keep an eye on. And that's kind of where the experiments with the spin-offs are interesting too. There's ways to harness incentives a little differently there. So definitely something to keep an eye on.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“I've heard that. There might also be, you know, you might lose something, might not having a closely knit team that works together versus teams that are spread out all over. But some of that is by design. I mean, I think Constellation attracts a sort of person. And for example, if you want to get rich very quickly, probably Constellation is not going to be a place you're going to stay very long. So I would say, yeah, I mean, it's hard to say because they're so good at it. So what's the drawbacks for them specifically? I don't know that there's too many other than perhaps there's something to this that there's maybe some difficulty in retaining people. But, you know, again, part of that is by design. And they seem to have managed through it pretty well.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“First, yeah, you're right. I mean, the decentralization has been kind of been a key thing. I think it was Larry Cunningham who said that the genius in CSI was that the people coming up with solutions to the problems were the ones who were closest to the problems, which I liked the way that was put. And they do have this culture of sharing knowledge, so it works really well for them. Drawbacks, I would say, well, first it might be worth pointing out that they're not all decentralized, like Lumine is not decentralized. They have a centralized M&A team that work together in Toronto with David Nyland. So I have heard that this is not necessarily, you know, I guess you could say it's decentralized because Lou Mine is making their own decisions rather than constellation in HQ. I would say the biggest drawback talking to people is it seems to be perhaps around keeping your team together. There may be some thought that retaining people that are flung out all over the place is harder than when you're all working together.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“Yes, so this is something I need to spend some time on to get convinced of. But, you know, there is some value in the idea that constellation is a permanent home for these businesses, that they're not going to, you know, fold it and lay off everyone or kill the business or whatever. I mean, the owners who sell these businesses, if your goal is to sell for the top dollar, then constellation is not likely going to be your buyer. But if you're more concerned about you want to have a home for your business there, then that's where constellation has an advantage. I know that people are going to be skeptical about that, but I've talked to enough people to know that that is part of it. So, yeah, I mean, other than that, again, consolation is still, you know, you're dealing with businesses whether or not there's not a whole lot of competition for some of these where there's not a lot of organic growth or no organic growth. So constellation may still be the best option there in those cases.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“Kind of the niche that constellation is in. I don't know that they still have that much competition on those small things. So it's kind of weird. You know, I would say, yes, there's more competition, but there's still interesting nuances and it seems like there's plenty of room to deploy capital still.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“Yes, I would say yes, there's certainly been a lot more copycats and in practice as a firm's done some good work on this and they identified at the time and they report, which I think was last year, something like 34 private VMS consolidators. So it's quite a bit. But one thing that's interesting is that, you know, they are trying to copy constellations and there is, they're trying. But when you look at the deals, there is still quite a bit of difference. So for example, constellations average deal, you know, they're buying a company at like one time sales. These are very smaller deals I'm talking about now. You know, they may buy something, let's say, around $3 million in revenue and their organic growth is like zero, you know, very, very little. But when you look at the private consolidators and the type of deals they're doing, they are larger, two to three times larger typically. And they have a lot more organic growth. So they're playing a little bit of a different game. A lot of them, they're also because they're also leveraging up a little more. So I would say, yes, there's more competition, but.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, it could be. I mean, it seems like it. I don't know. We'll have to still kind of early. So, I mean, the usual rule of thumb is as deals get bigger, you know, your IRR comes down, which I think is okay in constellations case, because like you mentioned, they were doing 30, and now if they do 25 or 20 but can deploy a whole lot more capital doing that, I think that's still creating a tremendous amount of value. So yeah, we'll have to see what the specifics of the optimal blue deal are. But yeah, I'm pretty optimistic that they're going to do pretty well on that. I mean, it's hard to not do well when you only put 200 million down for a business of that size, probably generating 100 million in profits.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“$700 million with those kind of deals. So now I think the market's starting to think that, yeah, Constellations got lots of room to deploy capital still. And we'll figure out ways to put it to work. So that's one. And then the other thing I think that the other key part of Constellation is the organic growth rate. And I think that's been pretty strong. I think it's maybe even surprised a lot of people. It's been running about five or six percent all year, even better if you look at kind of the core maintenance and recurring. So I think the combination of those things together, you've got rocket fuel. So yeah, I'm really excited to see what they do next.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“I would say the big thing is I think the market has come around to the idea that constellation has found another gear when it comes to deploying capital. So if you look at 2018, 2019, 2020, those years, they were probably spending $500, $600 million in acquisitions deploying capital. And then it's really kicked up in recent years and did a billion and a half, I think it was in 2021 and 2022 is similar. And then the results we have through three quarters of last year, they were over $2 billion in capital deployed. So you're already through three quarters of a year last year. They're already three or four times more they did in a full year just a few years ago. And so, you know, the market knows that constellations deploy.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“Yep. That's a good question. I'm not sure exactly when. I'm going to guess it was somewhere around maybe, I don't know, somewhere around say twenty sixteen or so. And I remember being skeptical of it for a long, long while. It took years. I didn't really, I knew of it, but I didn't bother looking into it because I had such a bias at that time against a super inquisitive company like that. And it was buying software companies. And I think the kind of a common area of doubt around it was, well, yes, I remember this was my thought. This must be buying a bunch of junkie software companies. and has no terminal value and these things are all going to eventually be zeros and they're just going to keep running faster and faster to keep it going and i didn't really spend a lot of time on it for several years so i would say it was probably around maybe 2019 where i got more serious and i actually sat down and read mark leonard's letters and then i was like wow you know this this is worth digging into more and so um yeah so that's”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I love those kind of lists because you always find lots of names like that. I mean, you look at the last 20 years or so old Dominion shows up there as well, way up there. And you're just like, wow, you know, this little humble trucking company has been that much of a performer. I know like Monster Beverage, I think, was actually the number one performing stock over the last, maybe it was 20 or 30 years. I forget what the metric was. But again, it's a little bit shocking because you see this mix of business and you're right. You expect it to be dominated by the Amazons and Google's and Microsoft, but there's lots of pretty humble businesses in there that just compound at high rates for a long time.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, this is another thing why I even hesitate to talk too much about the market because people will talk about the market as if it's just sort of one thing. But of course, when you look within it, there's huge variations. Even just looking at the S&P 500, as you mentioned, huge variations within it. So you have to be careful about that. And then when you throw in overseas markets, I mean, there's a lot of diversity, a lot of stuff going on.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“Much. For most people, I don't think they should probably be looking at it every day. So, you know, I think another key part of distinguishing the noise from the real signals is if you spend time on the businesses that you own and really try to drill down on what the essentials, figure out what the really will matter for this business over the next, say, 10 years. And when you make that your filter, you know, what is a critical success points for this thing over the next 10 years? What has to happen? A lot of these other details sort of dissolve. Talks about whether there might be a recession next year. It's then become very important because again, you're thinking way out. You're thinking 10 years and you're going to own it through recession or two. And so I spent a lot of time on that figuring out what are the essential pieces of a business that will help it succeed and identifying that and then really staying focused on that.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, that's important to do. I think one thing I do is I don't spend time on that macro sort of guesswork. So, I mean, I can't tell you how many times someone has sent me, you know, some kind of think piece about something or other and, you know, I politely thank them and then I put that in the delete pile. I don't spend any time on that. I spend more time on my names. I mean, last year I met with several CEOs and of course then I spend time looking at new ideas, which is always fun. And so it's really where you put your attention. I really guard that attention carefully if you allow yourself to, you know, read into these narratives that people create, then it makes it more difficult to make a good decision, I think. You know, other things just kind of habits. I don't, it's taken a long time, but I don't log into my account every day. I try not to look at stock prices during the day. I try, I usually will check in the morning, see what's going on, and then I look again at the close. But even that's probably too much.”
2024-02-16 · We Study Billionaires · TIP608: Long-Term Compounding w/ Chris Mayer · IDENTIFIED FROM THE TRANSCRIPT