Welcome to The Business Buying Academy with Sieva Kozinsky. Here's what we have in store for you today:

1. They made $20 billion buying Burger King. Let's study their strategy
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2. Avoid this fatal mistake when buying a business​
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3. How do you buy $5 billion worth of real estate? I'll show you

🔑 Learn to buy companies like 3G Capital

These guys are one of my biggest inspirations.

3G Capital isn't nearly as famous a name as Berkshire Hathaway, but they have a similar approach (and even worked together on several deals).

Today, I'm going to dive into their strategy and give you a few lessons for your own business buying journey. Let's get into it.

3G Capital started in 2004, evolving from the personal investment office of Jorge Paulo Lemann (a Brazilian billionaire) and other partners.

They own major stakes in consumer goods companies like Anheuser-Busch InBev, Kraft Heinz, and Restaurant Brands International (I'll get into some of their deals below).

Unlike most private equity firms, 3G Capital focuses on doing one major deal at a time and devotes the bulk of its resources to the acquired company. The firm works with the companies they buy, “getting their hands dirty as operators, not just sideline investors.” In general, 3G Capital makes fewer purchases than the average private equity firm and holds onto its companies for longer, partnering with existing management and shareholders.
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​- 3G Capital History​

3G Capital has a concentrated portfolio and likes to take meaningful stakes in companies so that they can affect the outcome.

Here are a few other hallmarks of their strategy:

• Zero-Based Budgeting: 3G implements strict cost-cutting measures for their portfolio companies, requiring every expense to be justified annually, boosting profitability (as opposed to letting each budget item roll over automatically into the next fiscal year, like most companies do).
• Mergers and Acquisitions: 3G focuses on acquiring iconic brands with strong market positions, then merging them to create economies of scale (e.g., AB InBev).
• Talent-Driven Management: 3G recruits high-performing executives and incentivizes them with performance-based rewards to align their incentives.
• Global Expansion: They prioritize brands with international growth potential, leveraging global distribution networks.
• Long-Term Focus: Lemann invests in stable, cash-generating businesses, reinvesting profits for sustained growth.

At its core, 3G is a value investing firm.

They aren't buying the hot AI company trading at 500x earnings.

Instead, 3G targets companies, focusing on businesses with strong fundamentals but temporary market mispricing.

Here's how Managing Partner Pavel Begun put it in an interview:

My screening process is super unscientific. When the crisis hit in Brazil, and we saw the media commenting on it being the worst since the great recession, we pulled out a stock manual on Brazil. We went from A to Z reading about all the publicly traded companies in Brazil. We’ve done the same in Turkey, South Korea, Russia, Eastern Europe, China, and others. If there is a crisis, it is likely that there will be some attractive assets going on sale

Reminds me of Warren Buffett, who made many of his most famous investments during time of crisis and panic (like his $5 billion investment in Goldman Sachs that netted $3.8 billion in profits).

Sector Focus

3G has a strong track record in consumer goods, quick-service restaurants, and retail. Notable investments include Anheuser-Busch InBev (beverages), Restaurant Brands International (Burger King, Tim Hortons, Popeyes), Kraft Heinz (food), and recently Skechers (footwear).

Turnaround Expertise

3G seeks companies with untapped potential or operational inefficiencies, leveraging its expertise to unlock value through restructuring and strategic repositioning. For example, its Burger King investment yielded a 28x return through operational overhaul and global expansion.

Notable Deals

3G Capital acquired:

• 75% interest in Hunter Douglas for $7.1 billion in 2022​.
• Burger King for $3.3 billion in 2010, then took the company private. Burger King became publicly traded again in 2012, with 3G Capital retaining a 71% stake. 3G netted approximately $20 billion from the deal.
• Tim Hortons for $12.5 billion in 2014​ and merged it with Burger King, leading to the creation of Restaurant Brands International (the third-largest quick-service restaurant company in the world).
• ​Popeyes Louisiana Kitchen, Inc. for $1.8 billion in 2017​ (through Restaurant Brands International).
• Firehouse Restaurant Group Inc. for $1.0 billion in 2021​ (through Restaurant Brands International).

They also partnered with Warren Buffett in 2015 to acquire Kraft Foods for $40 billion​, then merged it with Heinz to form the world’s fifth-largest food company.

What can you learn from 3G?

• Get your hands dirty. 3G has turned around several businesses and made billions in the process by doing what other PE firms won't: Breaking down the operations and rebuilding struggling companies from the ground up. Too many PE buyers simply want to use financial engineering to make their money. But the much larger opportunity is taking the time and effort to maximize the efficiency of operations in your portfolio companies.
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• Figure out what the market is mispricing. If 3G were in the lower middle-market of private equity right now, they probably wouldn't be buying HVAC companies (which command the highest multiples). They'd likely be figuring out which types of businesses are being underpriced right now. What's an industry similar to HVAC that buyers aren't valuing as highly? Is there a good reason those businesses are valued lower?

🔑 Don't make this mistake when buying a business

Buying a business without getting a quality of earnings report is like buying a house without a home inspection. You’re taking a big bet without knowing what you’re buying, and it could be a disaster.

Even if the seller gives you all their financial statements, they often have very bad bookkeeping. ​

So, what should be in your QOE and financial due diligence package? ​ Here's what today's sponsor Appletree says about their QOE reports: ​

✅ Proof of Cash ​

Are revenues real? We rebuild the last 1-2 years using bank statements to verify that reported earnings arrived in the bank account.

✅ Addbacks That Actually Make Sense ​

We normalize SDE or EBITDA with logic, not wishful thinking. The hand-waving. No “adjusting away” real costs just to make numbers look better.

✅ Working Capital Analysis ​

Avoid the “Post-Close Surprise” where you’re suddenly short $150k in working capital. We calculate what the business needs to operate smoothly.

✅ Forward Looking Projections

​We model post close cash flow and debt service coverage under flat, growth, and decline scenarios – so you know how risky the deal really is.

If you’re sending out LOI’s or nearing a deal, don’t go in blind. Talk to Appletree for a pragmatic, thorough Quality of Earnings report – built by people who’ve bought businesses themselves.

🔑 How do you buy $5 billion worth of real estate?

My friend Jeffrey built a real estate company that owns and manage $5 billion in assets with a portfolio of 190 properties.

The lessons were hard-won over a few decades in the business.

He nearly lost everything a couple of times, but learned to manage risk while pursuing aggressive growth.

He told me how he got started in the business, how he found his initial niche, and tons of secret tips on how to buy, analyze, and manage real estate. Listen to this one if you want to build your own real estate portfolio.

​Watch on YouTube​

​Listen on Spotify​

​Listen on Apple Podcasts​

Have a great day,

Sieva

P.S. - Are you hiring? Get started with top global talent from Somewhere (I'm a customer and investor)

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

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