Invest Like The Best
Episode 28 Permanent Equity
Invest Like The Best

Episode 28: Permanent Equity

Permanent Equity

Trish and James Higgins run Chenmark Capital Management, a firm that acquires small businesses. We cover the process for evaluating businesses they are looking to acquire, what a search fund is and why they are becoming more popular, and their feelings on having skin in the game.

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CFA Institute. CFA Institute is a global association of investment professionals, whose mission is to lead the investment profession by promoting the highest standards of ethics, education, and professional excellence for the ultimate benefit of society. CFA Institute serves a global community of investment professionals working to build an investment industry where investor's interests come first, financial markets function at their best and economies grow. The Chartered Financial Analyst credential is the most respected and recognized investment management designation in the world. The views expressed in this podcast do not necessarily represent the views of CFA Institute.

[00:02:59] – (First question) – Looking at the process that they went through to identify their first company at Chenmark.

[00:05:02] – Why the company ended up in Maine

[00:05:58] – What was the raw material to first evaluate a business

[00:07:50] – Exploring how they priced out that first company and the factors that played into it

[00:09:42] – Asked about some of the hiccups of that first acquisition that wound up being things that they enjoyed.

[00:11:31] – Looking at the things that were supposed to be difficult that weren’t there

[00:14:06] – The balance of maintaining Chenmark’s edge while also looking to grow the portfolio

[00:17:12] – Asking about the future vision of the company

[00:20:46] – What talent and skillsets from their prior careers have helped them in this field

[00:26:00] – When it comes to buying a business, what are the factors that provide them with comfort to going to the next level

[00:27:58] – Diving into the rest of the Chenmark portfolio

[00:32:26] – A look at the competition in the search fund market

[00:39:38] – What are their thoughts about outside investors

[00:43:07] – What are their thoughts on fees, as far as what they could charge and what they think about the ones that exist in the rest of the investing world

[00:48:40] – What does it feel like to have skin in the game and to be taking so much risk in the venture personally

[00:55:21] – Looking at the most memorable day of their careers

[00:59:24] – Explore the kindest thing anyone has done for them.

Permanent Equity

Introduction

Patrick
My guests this week are Trish and James Higgins, who along with James' brother Palmer run Chenmark Capital. If you've enjoyed episodes with Brent Beshore, you will love this episode because we continue to explore the style of investing that I call permanent equity. Returns in permanent equity come first from the ongoing cash flows from portfolio companies, not from reselling businesses, 3 to 5 years down the line. The partners at Chenmark are pioneering this style of small business investing and share their experience with us thus far. These are exactly the kind of people I am lucky to meet as a result of this podcast, they live and operate in Portland, Maine, not in New York City. They are grinders who publish their lessons weekly in a newsletter that you should subscribe to.They describe an investing landscape that is very different than the one I am used to this style of investing continues to have a romantic sort of appeal, but like Brent, Trish and James are quick to tell us that this life is anything but glamorous. It is hard, often stressful work, but work that is ultimately rewarding at both the personal and portfolio level. I doubt this investing trend is going away. In fact, it is probably just getting started and we should all take notice. I will continue to find people who can help us all understand the category of permanent equity.You can find show notes for this episode at investorfieldguide.com/Chenmark, C-H-E-N-M-A-R-K. And one last note, the name Chenmark itself is a play on question mark and is meant to serve as a reminder to plunge into the unknown. A great name and a great conversation. Please enjoy my talk with Trish and James Higgins.

Acquiring Small Businesses

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