Lessons from Evergreen Acquirers
Most businesses are designed to be sold. A few are designed to compound indefinitely.
I spent time recently studying permanent capital structures: Lifco, Judges Scientific, Addtech, Danaher, Constellation Software etc. Companies that acquire niche businesses and grow them for decades, rarely selling.
Three structural features make evergreen structures work better:
1. Extreme Decentralization as a Forcing Function
When you own 200+ businesses across different industries, you cannot micromanage. The system forces you to hire great operators and get out of their way, use financial metrics for accountability, and accept you can't be an expert in 30 industries.
Danaher uses the Danaher Business System: a toolkit subsidiaries deploy themselves. Brown & Brown gives each office P&L autonomy. Lifco's subsidiaries set their own strategy, pricing, and hiring with minimal HQ interference.
Decentralization isn't a philosophy. It's a survival mechanism at scale.
2. M&A as a Core Competency, Not an Event
Most companies do 1-2 acquisitions per decade. These do 10-50 per year for decades. M&A isn't a 'strategy.' It's an operating discipline.
They don't overpay because no single deal matters existentially. They don't force integrations. They don't overpromise synergies.
Brown & Brown has completed 800+ acquisitions since going public. Judges Scientific has done 23 deals in 20 years with zero write-offs.
3. Incentives Aligned to Forever, Not to Exit
The compensation structure reinforces long-term thinking. Subsidiary CEOs typically get equity in their own business or profit-sharing based on multi-year cash generation, not parent company stock options.
Founder-operators often retain 20-40% equity post-acquisition and earn out over 5-10 years based on performance. At Lifco, management receives call options tied to long-term value creation. This keeps operators thinking like owners.
4. Infinite Time Horizon Changes Decision-Making
No exit pressure alters capital allocation. They invest in 10-year payback projects. They weather downturns without panic-selling. They compound through cycles instead of timing them.
Danaher held Beckman Coulter through a brutal downturn. The operating model is designed for decades, even though quarterly pressure exists.
The Portfolio is the Moat.
No individual subsidiary needs to be exceptional. The system works because of diversification across industries, countercyclical segments that balance each other, and cash-generative businesses that fund acquisitions during downturns.
The whole is antifragile even though each part is fragile.
These are case studies in how organizational architecture determines long-term outcomes. How you structure accountability, capital allocation, and time horizons shapes what returns are possible.
Worth studying, regardless of what you invest in.
#systemsthinking #organizationaldesign #permanentcapital #Holdcodesign #compounding
