3G Capital is an investment firm with a unique philosophy that other private equity firms and institutional investors should take note of. 3G believes that being a business operator makes for a better investor — and vice versa.
Founded in 2004 as a global investment firm and private partnership, 3G Capital has built a reputation as a hands-on investor focused on long-term growth. Its successes with household names including Burger King, Tim Hortons, Popeyes Louisiana Kitchen, Kraft Heinz and Hunter Douglas — as well as its partnerships with Warren Buffett’s Berkshire Hathaway — are case studies in the power of treating an acquisition as a owner-operator business-building proposition, rather than just a line on a portfolio spreadsheet.
“We are owner-operators first and foremost, as our owners are the individuals directly responsible for operating our companies,” CEO, founding partner, and managing partner Alex Behring told the Financial Times. “Everyone at 3G has considerable skin in the game, which creates powerful incentives to do what is right for the long term.”
3G Invests With Deeper Intention Than Most Private Equity Firms
In private equity, the norm is to identify opportunities, buy them, and then treat them solely as one of many assets in an extensive portfolio of investments, often with a short- or mid-term horizon on selling the asset. In the business world, many companies are run by people who operate the businesses but aren’t the investors or owners. 3G Capital’s philosophy is to be selective in the opportunities it acquires and then directly manage the company in partnership with the company’s key leaders and stakeholders from the perspective of an owner for a long period.
That essential philosophy plays out in many ways, making 3G’s engagements quintessentially different from other private equity firms. 3G’s representatives operate in the same manner as someone who owns any entrepreneurial endeavor. They become personally and deeply invested in the business, coming on board as part of the C-suite.
3G Executives Have Experience as Both Investors and Operators
For 3G Capital, it’s all one and the same. As investors, 3G keeps a keen eye on the business as an asset — measuring and evaluating its key performance indicators with a long-term investment mindset.
“We run our businesses the right way, every day,” Alex Behring told the Financial Times. “Ultimately, we make decisions based on the benefit conferred to our people and businesses in the long term, even when those decisions may be difficult in the short term.”
Throughout their careers, 3G executives move back and forth between investment and operational roles, providing them with a more analytical lens for how to allocate capital — whether that be on research and development, marketing, international expansion, logistics, or human resources — because they have the entire investor and operational skill set.
Investment analysts are trained to glean insight from their Excel spreadsheets and PowerPoint presentations. But any business operator knows that when you go into the real world and you’re running a business — whether it be a restaurant or a manufacturing plant or anything in between — you have to partner with and respect others’ strengths, cultural differences, and nuances. An investor who has the knowledge and perspective that comes from being a business operator will have a much deeper understanding of the vehicles in their portfolio. It naturally makes the investor more focused on long-term growth and the needs of the business and its people.
3G Has an Ownership Mentality and the 3G Model Brings Continuity to Operating Companies
3G Capital’s recent deal with window coverings manufacturer and retailer Hunter Douglas provides a valuable case study in how such an engagement works.
Hunter Douglas is a well-established family business with more than a 100 year history as a leading global player in the window shades industry. It is known for its innovation, entrepreneurial culture, leading brands and world-class management. The company is active in over 100 countries and has an exceptional team of founders and entrepreneurial managers, and an unrivaled network of dealers and fabricators.
In February 2022, 3G Capital acquired a 75% stake in Hunter Douglas, with the Hunter Douglas family patriarch selling his shares in a deal that valued the company at around $7.1 billion. The transaction was sourced through an existing relationship with the founding family. Members of the founding family stayed on the board and in operational positions to work with 3G over the long term.
Soon after the deal was made, 3G’s Co-Managing Partners, Alex Behring and Daniel Schwartz put together a management team consisting of 3G partners, members of the 3G global network and existing Hunter Douglas executives. The goal was to produce a best-of-both management team to lead Hunter Douglas toward continued growth and operational improvement. João Castro Neves, a senior partner at 3G Capital, served as Hunter Douglas Group CEO, while David Sonnenberg, son of Hunter Douglas patriarch Ralph Sonnenberg, remained executive chairman.
“As a private enterprise, Hunter Douglas will have the opportunity to advance and expand our business while preserving the family-led culture and strong relationships with stakeholders which have been core to our success,” said David Sonnenberg in an interview at the time of the deal.
The 3G Capital partnership with Hunter Douglas was seen by all parties as a long-term relationship to benefit both 3G as investors and Hunter Douglas as an operating company.
“3G Capital and Hunter Douglas share a strong belief in durable value creation through operational excellence, entrepreneurship, and a culture of meritocracy,” said Castro Neves. “I look forward to working closely with David Sonnenberg and the Hunter Douglas management team as we accelerate Hunter Douglas’ growth in partnership with our remarkable founders, managers, and business partners.”
The Sonnenberg family still holds a 25% interest in Hunter Douglas, which brings continuity to the company’s operation, both in the long term and day to day.
As investors, 3G’s philosophy means it has a much deeper understanding of its assets, because its people are involved on a daily basis. As business operators, it means 3G can bring experience and insight gleaned from the critical eye of an astute investor.
