Transcript
A (0:00)
Welcome back to a special episode of the operators pod. Today we are digging into M and A. This is everyone's favorite topic and there has been a flurry of transactions in consumer over the last few weeks. Billions and billions and billions of deals. Everyone from gruns to Unilever McCormick to Marsman create Wellness Huell. We're going to dig into why those deals are happening. What are the characteristics of these companies? What should you be thinking about if you want to sell your brand? Is it good to be a startup? Is it good to be an incumbent? What does winning look like right now? Ultimately all of this comes back to first principles. AI is of course top of mind. But what is it that makes for a great business and a great brand? And joining me today is Mike Beckham. You know Mike and friend of the show, Curtis Matsko. He's the CEO of Portland Leather Goods D2C monster retail behemoth multi nine figures per year. Knows his stuff. But before we get into any of this, we can't do it without some mention of our sponsors. So thank you to fulfill to Rich panel to North Beam and Saracenalux. Postscript and after sell let's get into it. I'm gonna set the table for all of us today because very recently we've had something like seven major consumer deals like four or five billion dollars in confirmed transactions in consumer and then we saw Marsman raise money from lcat. Create just raised some more money at the same time. Allbirds just got acquired for $39 million in a take private after I think after torching like $550 million. So that's interesting. It seems like we have the strategics are back which then means the PE firms are probably back coming back. You've got legacy conglomerates buying. If you're running a consumer brand right now, is the party back on? Like it feels like the exit window might be opening but at the same time the operating window might be closing. Like, like the, there's this tension with terrorists and AI and like should you be an incumbent, should you be new? I got so many questions for you guys today because I know you're think I know Curtis is thinking about it. Mike, I'm pretty sure you're thinking about it. But let's start off like it's clearly not 2021. We're not at the peak of, of COVID in consumer but the deals that are happening, these are big. Mike, what, what should people be taking away from all of this? Like you're, you're a consumer operator, you're you're building a company right now, what is the thing that you want or what's the thing you're thinking of?
B (2:27)
So there's levels to this. Let's, let's go really high level money investment money is going to want to flow to where they think there's durable future cash flows. And what's interesting about this moment in time is that there's more uncertainty about that than in a long time. Where are the durable cash flows when anthropic can totally blow up a SaaS business in one announcement, right? When you literally have model announcements or product release announcements from one company taking billions, tens of billions of dollars off the stock market, it begs the question of like, okay, where is safe? And I think that historically, if you look at private equity, venture capital, one of their favorite places to stick money with SaaS, huge margins, it was just a great place to invest with the kind of economics of the returns you're trying to create. And I think everybody is looking at SaaS and they're like, I have no idea what happens to SaaS. If you do great, you're going to make a boatload of money. But nobody really understands where software is going to go and how it's going to evolve from here. And so in general, what AI is doing from an investment perspective is it's causing everybody to kind of go back to the drawing board and saying, well, what are the things that I really expect to be generating cash flow five years from now, 10 years from now, no matter what happens here with AI, which nobody really knows what that is. And I think one of the conclusions that the investment community seems to be reaching is, well, there's still going to be physical products and especially consumable products that that market's not going anywhere. You know, it's not like AI is going to replace my need to drink milk or to get protein in my diet or to stay hydrated or whatever. And so it's leading to real opportunity in consumer that we haven't probably seen in a while. I mean, even in 21, if you looked at the deal flow, most of it was going to technology. And now we're going through a period where a lot of the money is flowing to places other than technology. And I don't know if it's like a timing thing where we just happen to see a lot of these deals announced, but I do know from behind the scenes there are quite a few other high profile consumer deals that are out there that will get announced over the next year. So it feels Like a sea change. And if you're listening to this and you're in consumer in some way, the best news I have is that right now it seems like the consensus is shifting towards owning a consumer asset is one of the more protected asset classes from AI. And that's a great thing if that's the asset that you're building.
