00:48:20 · Giuseppe Balzano
[00:48:20] S1: No. No. My my my assumption is the cost of equity of issuing shares of my holding to people that are not going to be involved in the business is too high. So I find... I always find... Try to find ways to buy 100% of the business, maybe with some sort of deferred payments, you know, it could be convertible notes, it could be a loan, maybe, But I try to do less, so I don't issue equity to new people. And then I finance every acquisition in an efficient way. So it's a mix of equity and debt. The amount of debt depends on the deal, of course. You know, if there is a big EBITDA, a super healthy cash conversion, I'm very happy to level the company. Technically, what we do is to drill down debt at the holding level. We don't put debt in the single deals. Why is that? It's because of the psychology the psychology of the founders. They they will tell me... They would tell me, so, Giuseppe, let me understand. You're buying my company with my cash or with my business? Good idea. So they they will they will never allow me to do it. She's not in Italy. Or maybe it was me not not convincing enough. So what I do is I just find a deal that's, you know, include buying 100% of the business in two, three years, and and I finance the acquisition with my resources. It could be equity. It could be debt. It could be deferred. You know? There's some other things we do. But there is one transfer from the holding to the to the founders. There is no difficult structure in place.
00:50:15 · Mikk
[00:50:15] S0: How is your day to day look like when it comes to you driving around Italy, managing those two companies? What do you change when it comes to the management team to hire a new CEO? Do you don't touch it at all? What's what's the current situation?
00:50:31 · Giuseppe Balzano
[00:50:31] S1: So we we found a compromise with myself, me and me. And I think the the the final the final outcome is to do something in between. So I like to buy companies in which the management team is in place. I'm not going to change the CEO. These are delicate companies. You know? Like, it might... We give you a picture, you know, Mikk... Maybe in this way, it's easier for the listeners. You have a company in the province of Tuscany, and as you know, Tuscany is famous for food. Maybe the employees are used to go home for lunch for two hours. Like in one of my companies, they do it. Every day for two hours, they go home. There is someone cooking for them. You know? So, like, can you imagine, you know, having an external CEO from McKinsey or something else to just, you know, change the policies of it? Maybe it's healthy for the company to do so. On the other side, what is the risk? And and most importantly, why should I do it? Like, if the company is doing 40% of EBITDA and it is working and it is growing and and people are happy to do so, who and why should make the should make the change? You know? So it's just a picture, just to give you an idea. So my my thesis is I'm gonna leave the company as it is, but we do a profession... Professional formal board every month in which there is one manager from the company, me, and one third party. The third party is someone that we pay as the holding company. They have skinned the game in my holding company, so it's either I pay them in a mix of options or cash or deferred something, or they're not advisers, and these people are industry experts of the company we buy. They sit on the board, They have their reputation coming from twenty five, thirty years of something, so they're not gonna risk their reputation unless they like the business. And they become... Technically, they become the chairman of the board. So they have their legal responsibility of having the board succeeding. And these people are not employees. They are not investors. They're just another kind of figure that we put together. And so this is how I handled the link between the subsidiaries and and the holding company. My day to day, I think, is 20, 30% dealing with shareholders. It's tough. It's a job.
00:52:59 · Giuseppe Balzano
Like, having 15, 16 people, luckily so, in my cup table means that I have to dedicate effort and time, you know, and and convince these people on some decisions, make them happy. Maybe visiting them. They visit me. Tomorrow, there is an investment coming from The US just to have a lunch with me, you know, and and have one company, have a visit, you know, and then... And do something, you know, just to to be close. You know? Another investor... Like, you're listening because I know you're listening, like, he flew he flew from another country. Okay? In... I was on vacation with my family. You know, I I did one week of vacation with my family. He came in my house on vacation, and we did a swim together. After that, he decided to join the company, we met other times. But that was the pivotal moment. He came to visit me in another region by the sea. We did a swim. We had a lunch together in a guest room. You know? I like to have these close relationships with founders, shareholders, advisers, employees. I tend to build very deep personal relationships if possible, and if the other person want to, which is another chapter. Then 20, 30% is dealing with the company, my company. So it could be structure, it could be meetings, it could be directions, you know, and the rest. So 50%, more or less, is meeting founders. So in in a given week, I think I do seventy... Sixty, seventy hours being, you know, long in the in the in the time. If you put together the travels, it's a lot because I end up maybe be... Today, I'll be home by 11:30 midnight. You know? So if you put together everything, it's not in eight hours. You know? It's more. So 50% of that is meeting with founders or traveling, you know, to meet the the founders. So I would say 50, and then the other 50 is external relationships and internal relationships. There is one component missing, which is dealing with with companies. The reason why I'm not putting is because with one, we closed the the agreement two months ago. With the other, I'm gonna do it in the in the last... In in the in the few... In the next few weeks. So technically, I'm not on the board, you know, just making decisions. I'm not gonna do it. But maybe someone is expecting me to make decisions. I'm not gonna do it. The company is very decentralized.
00:55:30 · Giuseppe Balzano, Mikk
So in the future, if we do another interview, I hope to lower, you know, some internal delegation, managerial stuff, and dedicate more time with the company... New company. Sorry. Old companies. So companies that we have in the portfolio. [00:55:46] S0: When it comes to the future interview, I should bring the camera crew and show them some Italy as well while having those in-depth conversations with you. Should...
00:55:46 · Mikk, Giuseppe Balzano
[00:55:46] S0: When it comes to the future interview, I should bring the camera crew and show them some Italy as well while having those in-depth conversations with you. Should... [00:55:54] S1: Would be awesome. Would be very happy to do so. I think Italy is still seen for bad decisions, but I'm not gonna jump into politics as a country, as a lifestyle country. It's not true. We have 20 regions. Every region is a country. If you visit Italy in Rome, okay, and then you go to Puglia or you go to Trentino or Sicily or Sardinia, these are five completely different spots. Completely different. Like, there's no... There's nothing in between. You know? So there's a lot of accents. There are a lot of cultures. We are being conquered by tens and tens of different cultures, you know, from Muslims to Vikings. You know? Everyone conquered Italy sooner or later in two thousand years. And and they all left something in the in the art, in in people, in how we do stuff, in how the regions behave, you know, with each other. So I think there is a lot to know and to learn about Italy. And from the industrial point of view, there is nothing. Guys, don't come to Italy. There is nothing. The the country is lost, so no boys. Italy will just be a touristic phase, so I don't have new competitors coming. But, yeah, it's not that true. We have a lot of know how and skills to to build stuff. So... [00:57:25] S0: Yeah. Man, you're you're you're grinding. You're really going after it. How are you incentivized?