Private equity with heart and soul
One of the favored playbooks of private equity funds is the leveraged buyout: the fund borrows large amounts of money to acquire a company that it then restructures for fast growth and sells for a gain a few years later.
For Mordy Rapaport, founder and CEO of A-6684, a private equity fund turned holding company that identifies, acquires, and manages operational businesses, the approach is quite different. Rapaport buys up businesses he can understand to manage them for the long term.
“While many in our field are focused on exciting growth prospects, my team and I love improving upon the foundations of good businesses that could potentially be great, thus tangibly unlocking value,” explains Rapaport, who cut his teeth in a variety of operational roles at the eponymous diamond information services business founded by his father.
Rather than looking for a quick exit opportunity, A-6684 invests in small-sized businesses across a range of industries that can be purchased at a reasonable price. Despite spanning different sectors, many of the firms are suffering from the same general management challenges. A-6684’s secret sauce is “compounding the knowledge” of its team members honed over years of experience working together and solving problems.
The businesses in its current portfolio range from an importer of metals and chemicals and asset-light companies in the last-mile logistics space through to manufacturing plants with niche offerings and favorable unit economics.
Business beyond the bottom line
Among the values that guide Rapaport is the Hebrew term Aniyei Irecha Kodmim, which means ‘the paupers of one’s own city’ and is commonly used to represent the notion of giving and taking care of those in your immediate surroundings.
“I believe in taking care of those around me. And if those around me happen to be one, 10, or 1,000 people, then we’ve made a difference,” said Rapaport.
The company takes its name from the identification number given to Rapaport’s grandmother, Susan, during the Holocaust. The pair established a special bond after he lived with her for 10 months in Miami in the later stage of her life.
“People that go through hell and emerge from it possess a certain inner strength and resilience that is simply unbeatable,” said Rapaport. “Starting a business from scratch requires tremendous stamina, the ability to rise up again and again, and the ability to embrace your past experiences while remaining focused on the future. Beyond honoring my grandmother in a discreet way, the firm’s name provides depth and meaning in a world where most are focused on the monetary aspects of business and the bottom line.”
While A-6684’s goal is to optimize its companies, it also looks out for the welfare of its employees. In practical terms, this translates to making decisions that put people first instead of profit. Rapaport highlights the case of an employee who had worked at one of their factories for 41 years. Instead of replacing him with someone younger and cheaper, Rapaport said keeping him on was the decent thing to do.
“He has three years until retirement so we’re just being fair human beings,” he explained. “It also sends a message to people within the company that there’s something beyond immediate profits. We want to find our efficiency elsewhere. We want to get to the same returns as private equity does, just with a bit of heart and soul.”
Rapaport also evokes decency in every aspect of his business relations. He says that, despite sometimes tough negotiations, he is still in touch with every person who has sold their business to him.
When hiring new managers to work in his businesses, Rapaport values operational experience over specific domain expertise and gives staff the chance to step up.
“When we are looking for CEOs for our companies, we advertise for a COO. And when they get the first phone call from the recruitment person on our team, only then do we tell them that we are looking for a CEO with operational experience,” he explains.
A toolbox for overcoming turbulence
Rapaport founded A-6684 after completing his EMBA at IMD in 2018.
Having spent 12 years working his way up to Chief Operating Officer in the family business, he was looking for an opportunity to combine his experience with fresh insights.
“I wanted to continue my education at a stage in life where my experiences would enable me to absorb the teachings in a more meaningful way based on my operational experience. In this regard, IMD was perfect for me, in that its approach to education was highly suited to me personally,” he said.
Learning something new every day – whether this is calculating the VAT expense reimbursements on cars or renegotiating a lease – is what keeps Rapaport motivated, along with the people with whom he works.
“I am tremendously fortunate and blessed to be surrounded by the most amazing people in all aspects of our activities,” he said. “Having the ability to choose who we work with is the ultimate reward for me and makes all the difference in good times and in bad.”
While the business environment these days feels increasingly turbulent with executives having to navigate supply chain crunches, input price shocks, and geopolitical tension, Rapaport remains optimistic and excited for the future.
“My view is that business is about creating real value and doing good, which are fundamental truths that turbulence and unprecedented change will not ultimately eliminate,” he said. “Focusing on one’s core competencies, remaining humble, and being fair is more than enough to have in one’s toolbox to overcome any turbulence in the near and long term.”