Re: Options
Specific s? I know the theory
On Wed, Mar 7, 2018 at 12:17 PM Gianni Serazzi < > wrote:
Dear Jeffrey,
here's a few bullet points on model investment optionality
OPTION A: BUY LARGE NETWORK
Brand name recognition
Trophy company on day one
Top models on day one
Large investment on day one (20-60M for big names)
Difficult to finance with debt because they have very limited profitability
Low IRR, even with a great manager (not necessarily me but whoever you think will be at level) profitability will be 2-5% of the investment if they do a great job. Many of them have negative returns at present once you scratch the surface
High risk profile because you buy overpaid agents. When/if they leave the franchise loses value
OPTION B: ORGANIC GROWTH, BUY A MEDIUM COMPANY AND INVEST IN GROWTH
Much lower starting investment (3-5M and 1-2M investment for a few years that can in part be financed with profits after initial years)
Optionality, when IRR increases also investments can increase
Higher IRR
History tells us that who created companies and networks made money, not who bought the existing network
We have connections with mother agencies and agents since 20 years, know who to hire (not to buyout) or partner (minority stakes in mother agencies)
+A disruptive business model similar to what I was doing with John Casablancas in Starsystem can change the rules of the game
Brand name needs to be created or grown to a strong global basis
Trophy company needs to be created, not present in day 1
Just a few thoughts, you have the luxury to have way more money than what you can spend in this life so for sure have a different point of view.
Best
G
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