Why Patience Pays Off: The 3G Capital Approach to Long-Term Value Creation

Since its 2004 founding, global investment firm and private partnership 3G Capital has been able to successfully invest in numerous companies — by adopting an owner-operator outlook that centers on contributing more than just an infusion of capital.

The firm’s business model involves pursuing high-quality businesses — entities that possess elements such as iconic brand value or strong growth potential — which it feels would benefit from its long-term involvement. Alex Behring of 3G Capital emphasized this commitment by saying, “We want to own these companies forever. This gives us the luxury of maintaining a very disciplined approach to each one of our businesses as we are able to identify and own companies only once we are entirely satisfied that they are well-positioned for profitable long-term growth and successful brand building.”

Its work has paid off for a number of companies. When 3G acquired Burger King in 2010, for example, the firm made a series of processes and other changes. In the following 18 months after the chain went public again in 2012, Burger King’s stock doubled according to Forbes.

A Unique Investment Stance

Twenty years ago, 3G Capital was founded by a group of business partners who had worked together for decades.

Three of them — Carlos Alberto Sicupira, Marcel Herrmann Telles, and Jorge Paulo Lemann, who in 1971 co-founded Banco Garantia, which became Brazil’s leading investment bank and was sold to Credit Suisse for $675 million in 1998 — were colleagues who worked closely at Banco Garantia. They also recreationally spear-fished as a group and began personally co-investing together when they found companies that looked promising, such as Brahma, Brazil’s largest brewer.

In the mid-1990s, when Sicupira served as a guest speaker in a class at Harvard Business School, he met Alex Behring, who was a student at the school.

Behring went on to work for Brazilian private equity firm GP Investimentos in 1994 and then served as the CEO of América Latina Logistica (“ALL”), a portfolio company that owned Brazil’s largest rail network. During Behring’s tenure with the company, which lasted through its IPO in 2004, ALL rose to more than 40 times its initial acquisition value.

By the time Behring left the organization, he had decided that he, Sicupira, Telles, and Lemann should start a new firm in the U.S. that would consider investments outside of Brazil. Behring wanted the new entity to feature the same owner-operator structure as Banco Garantia, focusing on one company at a time and allocating resources to help the organization instead of just providing funds.

In 2004, he moved to New York City to launch 3G Capital — which was co-founded by Sicupira, Telles, Lemann, and Roberto Thompson Motta, a former GP Investimentos co-founder who has also served as a member of the board for Anheuser-Busch InBev, Ambev, and other companies.

Since its start, 3G has employed the owner-operator method as Behring intended — which has helped the organization accurately assess businesses, execute on operational plans, and generate attractive returns after making an investment. “We are owner-operators first and foremost, as our owners are the individuals directly responsible for operating our companies. Everyone at 3G has considerable skin in the game, which creates powerful incentives to do what is right for the long term,” Behring noted.

Comprehensive Assistance

When working with companies it has invested in on an ongoing basis, 3G Capital utilizes an array of internal talent resources — including senior and seasoned operating professionals and talented junior members of its team.

According to the firm, working alongside more experienced partners allows younger investment professionals to obtain additional key skills and operating expertise, helping to strengthen 3G’s overall capabilities.

Over the years, the firm has found that family-owned crown jewel businesses looking for a partner to help them transition to their next stage of operations can be a good fit for its business model.

3G Capital obtained a 75% stake in Hunter Douglas in 2022 to help the window coverings manufacturer and retailer maximize its growth potential.

Valued at approximately $7.1 billion, Hunter Douglas, which is headquartered in The Netherlands, had been owned by the Sonnenberg family since 1919. The family retained a 25% share in the transaction.

In a press release about the deal, 3G Capital officials said they were honored to be partnering with the company for the next phase of its global growth. Daniel Schwartz, co-managing partner of 3G Capital, emphasized their commitment to legacy businesses, stating, “As owner-operators with a long-term investment horizon and significant experience operating global branded businesses alongside founding families, 3G Capital is a dynamic steward to continue the legacy of Hunter Douglas.”

Long-Term Value Creation

3G Capital has made a name for itself with its long-term, hands-on approach to investment. Unlike traditional private equity firms, 3G takes a deep interest in the operational aspects of the companies it acquires, ensuring they are poised for sustainable growth.

Behring summed up their approach succinctly: “We analyze potential investments as an external party, gauging our ability to enhance the company’s prospects through a unique value creation strategy. Then we actively manage the portfolio to drive results.” This commitment to long-term growth can be seen in the success of brands like Burger King and Hunter Douglas. Schwartz further emphasized this: “When we partner with companies like Hunter Douglas, we are not just thinking about their immediate profitability but their long-term growth potential. This means identifying areas for expansion while maintaining the integrity of the business.”

In line with this philosophy, 3G Capital’s funding structure has helped support its long-term owner-operator approach to investing. The firm’s capital base is derived primarily from internal partners, other individuals, and select top-tier institutions; the firm and its partners are typically the largest investors in 3G Capital’s funds and portfolio companies. Behring added, “Our capital base is derived primarily from internal partners and select institutions. That system provides us with considerable operational flexibility, helping us avoid the short-term pressures other groups might face.”