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Good morning! It's Friday, December 8th. Today’s post looks at Sir Jim Ratcliffe and the cold-blooded acquisition strategy he used to grow his multi-billion-dollar chemical empire.

THE FEATURE

The Acquisition Strategy Behind England’s Second Richest Man

If you’re a soccer fan, you’ve likely heard of Sir Jim Ratcliffe– the man worth $37.6B who’s set to purchase 25% of Manchester United.

Manchester UTD fans are skeptical about Ratcliffe’s takeover. However, they could get a glimpse into the future by looking at the chemical tycoon’s history of acquiring companies and forcing them back to profitability. 

The Path to ~$40B

Jim Ratcliffe is 71 years old, but his massive net worth is much more interesting when considering that he only became an entrepreneur at the age of 40!

In the 1980s, equipped with a chemical engineering degree and an MBA, Ratcliffe began working in the chemical division of the oil and gas company Esso. Ratcliffe climbed the ladder at Esso until 1992 when he was headhunted by private equity group Advent International.

The plan was to buy out a chemical business from BP, make it profitable, and grow an empire from it. Despite backing from Advent, Ratcliffe had to risk everything to make the deal happen, putting all his money on the table and even mortgaging his house.

Through this buyout, INEOS was born: the fourth-largest chemical company that’s acquired 60 manufacturing facilities across 13 different countries. Last year, INEOS generated $22.6B with a gross profit of $2.8B!

A large portion of Ratcliffe’s $37.6B net worth is a result of his 2-thirds stake in the INEOS chemical empire, but the rest of his portfolio is its own beast that spans from the oil industry to sports teams:

Oil and Gas

• Forties Pipeline System

• Chesapeake Energy's Eagle Ford Assets

Automotive

• Daimler’s Hambach Plant

• INEOS Grenadier (produces car model similar to Land Rover Defender)

Sports

• Team INEOS (professional cycling team)

• INEOS Brittania Sailing Team

• FC Lausanne-Sport (Swiss soccer team)

• OGC Nice (French soccer team)

• Formula 1 Mercedes team (1/3rd ownership)

What’s driven Ratcliffe’s success is the ruthless acquisition strategy he’s used across every industry.

How He Won: The Short, Sharp, Shock Acquisition Strategy

In the beginning years of INEOS, Ratcliffe grew the company via high-risk, high-reward acquisitions. 

At that time, in the late 90s and early 2000s, investors weren’t fond of chemical production– it's a cyclical commodity business that’s heavily impacted by the overall economy. But that didn’t stop Ratcliffe from putting everything on the line time and time again to purchase chemical plants, using loans, venture capital equity, and personal savings. 

His strategy was to purchase “orphaned assets” from blue chip companies and turn them into successes. Before each acquisition, he considered whether he could double their earnings within five years through his short, sharp, shock strategy. 

Ratcliffe’s acquisitions were almost always successful because he was willing to take charge and be the bad guy, overseeing mass layoffs and restructuring that oligarchical companies like BP weren’t interested in doing (possibly due to negative publicity).

Within the first 10 years, INEOS made over 20 acquisitions of commodity businesses from energy giants like ICI, BP, and BASF. The formula for this acquisition spree was simple: take on massive debt to make a buyout, implement harsh cost-saving measures on the asset, see profitability, and repeat. 

This tactic hasn’t come without costs. For example, Ratcliffe was publicly vilified in 2013 by union activists for his brute force tactics used in restructuring energy company Grangemouth, which supplied 70% of Scotland’s fuel.

Key Observation: If a Tactic Works, Use it Everywhere

Ratcliffe doesn’t see his short, sharp, shock strategy as something only applicable to the energy industry.

In fact, he’s looking to apply the strategy to Manchester United if his ownership deal goes through. Last month, it was announced that Ratcliffe is “planning a FIRE SALE of Man United’s attackers” when he takes over. This is due to United’s staggering spending spree over the last decade, spending £1.4billion on transfers alone. 

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