The management team is the most important asset in a middle-market acquisition and, paradoxically, the hardest to evaluate. We share how we assess it and why it conditions our decision.
If I were asked to reduce the investment decision to a single factor, I would say without hesitation: the team. Not the numbers, not the multiples, not the sector. The team.
An excellent management team can transform a mediocre company. A mediocre management team can destroy an excellent one. I have seen both situations enough times to hold this conviction firmly.
In a large corporation, individual management importance is diluted by systems, processes, and controls. In a middle-market company, the management team is the company. Five to ten people make all relevant decisions.
When we buy a middle-market company, we are buying two things: a business and a team. If the business is good but the team is not, we have a problem. If the team is good but the business has issues, we have an opportunity.
Not through formal interviews or psychometric tests, but through observation throughout the investment process. In early meetings, we watch how the founder and team interact. During due diligence, we assess the team’s analytical capability. In individual conversations with each key manager, we seek to understand their vision, frustrations, and ambitions.
Technical competence — each director must master their function. Management capability — which is not the same as technical mastery. Attitude towards change — the investor’s entry means changes; directors who embrace them will succeed. Loyalty vs dependency — a loyal director stays because they believe in the project; a dependent one stays because they cannot function without the boss. Reasonable ambition — wanting to grow, improve, and learn, tempered by realism.
We plan for key hires — typically a professional CFO and a general manager who can progressively assume the founder’s functions. Incorporating external managers in a family company is a delicate process managed with clear role definition, founder involvement in selection, and board support.
A company with a strong, autonomous management team is worth more than one with identical numbers but founder dependency. The difference can be one or two multiple points — worth millions of euros. For the entrepreneur preparing for a sale, investing in the management team is probably the investment with the highest return.
Dirk Manuel Martens Jimenez Founder, Blue Mountain Capital
By Dirk Manuel Martens Jiménez
By Dirk Manuel Martens Jiménez
By Dirk Manuel Martens Jiménez
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