Business

Mars family’s framework offers a purpose-driven ethos to private market investors

Private equity firm Acacia Group is on a mission to improve the way businesses operate using a values-based system developed by the Mars family, called the “Economics of Mutuality”. 

Mars, with more than $40 billion in annual sales, has worked hard to be a purpose-driven multinational and much of those efforts are driven by members of the Mars family. 

From one generation to the next, it was always about how we did business rather than what we do as a business

The Mars family and the business have been driven by the mantra of how the family “did” business. As Victoria Mars said a few years ago in an interview with David Bain, the publisher of Family Capital, for a PwC survey on family businesses: “From one generation to the next, it was always about how we did business rather than what we do as a business.” 

And out of that came the so-called Five Principles – quality, responsibility, mutuality, efficiency and freedom – that remain a core part of the culture of Mars. 

“The real connector between the family and the company are The Five Principles of how we do business. It’s the glue that holds us together,” said Victoria. 

This culture remains paramount at Mars. When the global financial crash struck in 2008, the Mars leadership posed a profound question: “What should be the right level of profit?” What resulted was a management framework – the Economics of Mutuality – which the family business developed in partnership with the Said Business School at Oxford University. 

At its heart is a five-step process for unlocking impact and innovation within businesses by identifying a key “purpose”, the benefits of which can then be tracked. The goal is to help companies operate with real socio-economic impact.

Virginia-based Acacia is working closely with the EoM Foundation – spun out of Mars in September 2020 – on how to apply EoM metrics to non-financial forms of capital as lead indicators for managing performance within its portfolio. 

“Acacia is leveraging it as a new approach to thinking about how we manage deployed capital and the intersection between investment capital and value-creating operational oversight,” says Gavin Long, co-founder and partner.

“Our vision for private equity is to look past it is merely a financial transaction and move it towards a partnership model that invests in companies in local economies that are distressed, in many respects. Grow, invest and dream together; that’s the aim.” 

As Long adds: “Superior returns are not mutually exclusive to positive social impact.”

Long has close working relationships not only with Nadia Terfous, who is the managing director of the EoM Foundation, but also Stephen M. Badger, chairman of the board and former chairman of the board at Mars. He is the son of Jacqueline Mars and great-grandson of Franklin Clarence Mars, the founder of the famous confectionery maker.

“We’re working on a mutual value framework by going into different industries to identify problems and potential areas of purpose. We’re developing an EoM dashboard (for company executives) to monitor and track different metrics,” explains Long. 

Recently, Acacia has been working with one of the biggest customers in one of its portfolio companies – Applied Insight, a cloud technology platform – to address the biggest issue facing the company to make the biggest impact. 

“One of the biggest issues in the digital transformation space is access to talent. The customer is a US government agency that has set up a non-profit that prioritises deprived young people in inner-cities. 

“We’ve also partnered with one of the world’s largest cloud services providers to set up a training programme where we take these young people and provide them with technology skill-set opportunities and economic opportunities. We’re creating supply by going out to inner-city areas, prioritizing under-privileged people and addressing a very real business need,” says Long. 

This particular initiative is already having a massive social impact on inner cities like Baltimore, which has one of the highest intercity deprivation problems in the US. 

“We see digital transformation as an educational and socioeconomic equalizer. You don’t have to have gone to a top university. All you need to have is an aptitude to learn. We think these initiatives are a great way to meet economic demand and do some societal good,” he says. 

According to Long, a “good proportion” of Acacia’s family office investors think this purpose-driven approach is the way private equity has to go. 

“We see family offices wanting to get closer to transactions and learn a lot more about the operational profiles of businesses; what a business is actually doing, from a social impact perspective. For us, working closely with EoM allows us to provide those metrics and provide visibility back to the limited partners; what’s transpiring within a company’s operations, that is actually making a positive social impact?” 

This is not merely a case of checking the ESG box but an attempt to effect real change in how businesses operate. Long says investors like the fact that focusing on EoM metrics to measure the value of a company’s impact on society is pursued through an operational methodology that is both repeatable and tech-enabled.

And it’s not only in US inner cities that Acacia is focusing its efforts. It is also helping UK local economies that have been left behind by globalization.

“We are working on a local initiative in Grimsby in northeast England. Grimsby has been decimated by the decline of its fishing industry over the last few decades and is now an austere place to live. We are working with various partners to provide technology training capabilities. We are close to one of the European families working with us on this initiative. We share a common faith,” says Long.

Long has personal experience of the impact globalization has had on small towns and cities. His hometown of Hickory, North Carolina made the front page of The Washington Post when unemployment there reached 18% in 2008, following the global financial crash.

Long established Acacia with fellow co-founders, Frederic Cassis, Craig Dawson and Matt Milstead in 2016 having first begun his professional journey in seminary. The plan was to become a pastor and professor of theology. But all that changed one summer when Long took a job as a temporary executive assistant at Arthur Anderson. He hit it off with one of the managing partners, dropped out of seminary, and was offered the chance to become an investment bank analyst. 

The desire to incorporate EoM into Acacia’s investment thesis stems from this long-held desire to do good in society; something that took a while for Long to reconcile as a private equity investor until he stumbled upon a journal that featured a piece on EoM. 

“It made so much sense reading that piece, which explained how to operate businesses in a way that creates social impact (rather than purely for the sake of profit),” he adds.

Management solutions like EoM could prove helpful to family offices looking to enhance the impact of their investment portfolios and who want to see the social benefits of the companies they invest in. Corporations that develop a purpose-driven, holistic culture are going to appeal to younger talent who want to understand what a company can do for them; it’s not just about having to prove themselves and their own personal value. 

As Long concludes, the next generation of workers, especially in the technology sector, want to feel connected. 

“By implementing some of these EoM approaches you can create an operating entity that drives growth, drives alpha, but simultaneously mitigates risk because people want to stay with the company. If you commoditize people they’ll commoditize you right back. Losing talent has an immediate impact on a company’s operating profit.” 

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