Private Equity or buy & hold?

[Cruze]

hey guy,
Which is more lucrative on a 25-year horizon?

1. private equity version
Buy a company -> expand in 4-5 years - sell.
Buy a bigger company with the money, grow it and sell it again in 4-5 years.

Typical private equity business, over 25 years.

2. buy & hold version
Buy a company -> grow it -> keep it.
From the profit buy another company -> grow -> keep. And buy another company after a few years, grow it and keep it. Classic buy & hold, only without shares, but with own companies.

With which model do you get the better return over 25 years?

Greez

 

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[ljean]

Just like any investment, hold it until someone offers you a no-brainer price to take it off your hands.

 

[Ronak]

I would start with the buying and growing part and worry about the rest later.

 

[Mathuin]

Depends.

I think you should worry about building a profitable company first before any of this.

Two examples within a similar industry come to mind. (Felix Dennis & Rupert Murdoch in the magazine biz)

Felix Dennis would likely take the first approach and sell early.

Rupert Mudroch holds his for considerably longer.

Either can work.

 

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[Hagi]

I'm not sure there is a right answer to your question. Time will tell I guess. It will depend on the current circumstances of the business and the opportunities that are there. I think choosing one over the other upfront will only limit your options and capability to make the right decisions down te road.

 

[Johnny boy]

Both options have produced million/billionaires and have also bankrupted people.

The variable is the "grow it" part of the equation you have seemed to have written off as a foregone conclusion.

This game is not so cut and dry. It's not a job where you can search for the salary online and see the range. Businesses can lose a billion in a year, make nothing in a year, make a billion in a year, and everything in between. You can do well buying them and growing them into a giant company. You can flip them and move on to something else. The correct move is based on a million different factors. If you started a company and it grew into something as large as Amazon or Telsa, that would be better than hopping around flipping different companies right? It all depends.