Rick Brutti discusses business evolution with Joe Petrowski in his show Overlooking the Business Battlefield. Joe explains that consolidations and mergers are natural progressions of most businesses and industries. These types of activities are driven by three factors…lowering costs, sticking to the core business, and generating higher revenues. You can grow in every area and the bigger you are the more efficient you can be.
Buying your competition sometimes is the best solution to leverage economies of scale. Sometimes businesses become commoditized, such as fuel, advertising and cable television industries. The government tries to prevent the formation of monopolies. But as long as there are innovators and entrepreneurs there’s little chances of having one big company take over a whole industry.
Joe also shared some important advice that he learned from Larry Bossidy retired Chairman and CEO of Honeywell International Inc., “The really big threat to most businesses is not the competition, but the competitor that is developing a new technology or platform that could make your business obsolete”
When Joe previously left Gulf as the CEO he formed his own investment bank, Mecantor Partners. Joe informed us that effective August 1, 2015 his group has acquired Gulf Oil. When Joe left Gulf he started looking at acquisitions. He believes that when you are looking at acquisition candidates you have to take into consideration revenue projections, costs to deliver, and competitive advantage. He also states, “If you are solving a problem or fulfilling a desire, you need to know how to articulate this in 3 sentences, otherwise you probably don’t have an in-depth knowledge of the business.”
Joe assured us that when you buy a company you are not only buying assets, you are buying talent, technology, and skill sets which aren’t valued on the balance sheet as much as they should.