Welcome to The Business Academy.

This is the story of the man who went from being a career lawyer to one of the richest Private Equity leaders in the world.

Reggie Lewis was a successful M&A lawyer for years before he bought his first business. Acquisitions put him on the map as one of the most successful business owners in history.
Reggie passed away early at the age of 50, but he completed two very successful acquisitions and transformations by then.

First, he bought McCall Pattern Company, a home sewing pattern business for $22.5 million from Norton Simon.

Lewis was reading Fortune magazine one day when he learned that Esmark holding company which recently purchased Norton Simon, planned to divest some of its assets. McCall Pattern Company was one of the companies they planned to sell.

McCall was in decline with fewer people sewing at home. In 1983 it posted profits of $6 Million on sales of $51.9 Million.

The business was number two in its industry. McCall had 29.7% of the market share, while industry leader Simplicity Patterns held 39.4% of the market share.

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Lewis saw value in the brand name, loyal customer base and felt the multiple on profit was fair. He was able to raise $1 million from friends and family and borrowed the rest of the money ($22 million) from First Boston Corp.

Lewis proved to be an incredible operator. He began exporting to China, introduced new product lines, and found ways to use or sell fixed assets of the business that were being underutilized.

He grew profits to north of $11 million per year. And later sold McCall for a 90x return. Lewis personally made $90 million on the sale

The month he sold McCall he got a call from a banker that Beatrice International was for sale…

Beatrice International was a large food processing and distribution company in Europe. The company owned dozens of grocery stores and distributed to other firms as well.

In 1987 Lewis acquired Beatrice International for $1 Billion from KKR.

Here are some interesting learnings I took from Reggie's journey:

Set an unreasonably high bar for people - Reggie was notoriously a very difficult person to work with. But his executives described him as a world-class basketball coach. He was able to get the most out of his players. He expected people to work late into the night, as well as weekends to deliver results that others thought were unnattainable.

It's a good reminder that even the best executives will underdeliver their potential unless they are guided by an unreasonable leader. As a leader do you get 50%, 80%, or 150% of the potential from the people around you? What can you do to get more?

Dream bigger - Reggie's first acquisition was for $22 million ($60 million in today's dollars). His second acquisition was for $995 million. Most people I meet are limited by their confidence and their belief in themselves. I sometimes feel limited by my imagination as well. To fix this, I surround myself with people who dream bigger than I do.

It's ok to not have all the answers - when Reggie won the bid for both Beatrice and McCall Pattern he did not have the money lined up. He also didn’t know anything about the food distribution businesses. But he believed he had a good deal, and would be able to raise the money he needed. He also believed in his ability to find the smartest people in the world and learn from them.

Do one big thing really well - Reggie dedicated 100% of his focus to a single project at a time. And made sure it was successful. This makes me think of the famous Warren Buffett quote: “Forget diversification. Put your eggs into a single basket and watch the basket carefully.”

Pay attention when the tides change - the opportunity to buy McCall Patterns arose when Esmark acquired Norton Simon. When an acquisition happens the buyer is often looking to sell some "non-core" assets from the business which helps them focus and reduce their debt. These situations are a good place to look if you want to buy a good business.

🔑 A Customer FlyWheel...

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(note: I'm an investor in Scribe)

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Have a great week,

Sieva

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Disclaimer: nothing here is investment advice. Please do your own research. The information above is just for information and learning.

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