Invest Like the Best with Patrick O'Shaughnessy

Brent Beshore - Learnings from a Year of Unexpected Events - [Invest Like the Best, EP. 226]

May 18, 2021

Brent Beshore, who leads Permanent Equity Fund, shares invaluable insights gained from navigating the post-COVID economy. He delves into the resilience of the market, shaped by government actions, and discusses the surprising boom in the pool market amid pandemic home improvements. Brent also highlights the importance of adaptability in deal-making, emphasizing trust and creativity over mere financial bids. With a focus on effective executive compensation and the challenges in small business private equity, his perspectives on inflation impact are particularly enlightening.

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INSIGHT

Economic Drivers

Last year's economic success was primarily driven by government intervention and a shift in risk perception.
Pre-COVID, investors were risk-insensitive, but the pandemic caused a temporary risk-off approach, followed by a return to risk insensitivity.

INSIGHT

Current Deal Dynamics

Current deal dynamics are messy due to high velocity, driven by capital gains tax increase concerns.
This has created a seller's market, giving firms like Permanent Equity many deal options.

ADVICE

Margin of Safety

Maintain margin of safety in all areas, including relationships, finances, and capacity.
Use crises as opportunities to improve communication, forge relationships, and acquire talent/assets.

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My guest today is Brent Beshore. For those that don’t know Brent from his frequent appearances on this podcast, he runs Permanent Equity Fund and has been a close personal friend for the past five years. Brent and I revisit our conversation from the heart of COVID to touch on key lessons learned and where that leaves us today. Brent sits at a unique touchpoint of the economy, so I particularly enjoyed his anecdotes on inflation and how to operate around these dynamics. I hope you enjoy my conversation with Brent.

For the full show notes, transcript, and links to mentioned content, check out the episode page here.

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Show Notes

[00:03:52] - [First question] - Why last year ended up being so bullish

[00:07:14] - Deal dynamics of the current landscape

[00:09:54] - Lessons learned about managing a team through the pandemic

[00:14:39] - Observations on the housing market and the pool industry

[00:18:56] - Current labor force dynamics of trades

[00:21:18] - Considering labor dependency when investing in new businesses

[00:23:10] - His perspectives on the future of tech through his investment lens

[00:25:50] - Seeking out traditional businesses that reinvent age-old frameworks

[00:27:50] - Key stages of the art and science of evaluating and acquiring a company

[00:31:45] - How much information he wants to know before making an initial offer

[00:34:25] - Psychology of structuring and aligning incentives post-acquisition

[00:37:41] - What defines a great deal negotiator

[00:40:05] - His most creative act when structuring a deal that didn’t work out as well

[00:42:17] - Hist most creative structuring act that proved useful for the upside

[00:43:34] - Notable changes in large-cap private equity markets

[00:45:41] - Skills he feels he can improve on over the coming five years

[00:48:30] - Coaching small companies on how to recruit top tier talent

[00:52:49] - How to effectively get people to say yes to job offers and openings

[00:54:19] - Absolute and relative changes in the opportunity set of small to mid-cap markets

[00:57:40] - Lessons learned from strong support networks and onramps of upward mobility