Whenever you can, you should check your original investing thesis and see how things turn out.
In November of 2017 BCE Inc. (Bell) (TSX:BCE.TO) (NYSE:BCE) announced was going to acquire AlarmForce Industries Inc. (TSX:AF.TO), Canada’s lone public home security and monitoring services company, for approximately $166 million ($16/share).
We took a look at this company in November of 2016 (a year before almost exactly to the day). At that time it was trading at ~$10/share. The Company had a new management team, was in the middle of a brand and product refresh, and started outstourcing product development. Our conclusion was “wait and see” in the sense that we liked what the Company was doing but things were just too unclear for us to buy – effectively it was execution risk. Full details here: http://www.canadianvalueinvestors.com/home/2016/11/17/alarmforce-tsx-af-will-they-keep-your-dollars-safe
Interestingly, Pavel Begun, Managing Partner at 3G Capital Management, recently spoke at Ivey Business School and covered why they bought the business originally:
Lesson learned: Keep checking your thesis, and make sure you didn’t miss anything that you could have foreseen.
3G’s initial thesis was good. The world changes and in this case unforeseen technology changes eroded some of AlarmForce’s business and advantage, but the core thesis that they had a structural competitive advantage – by not having to rely on a network of dealers – remained sound.
And us? We missed out on a 60% upside in one year, sure, and on the day of the announcement we definitely had FOMO. But after reviewing the situation, it was not foreseeable that they were going to be bought at this time (although it is a logical outcome). There was still a lot of execution/management risk (something that 3G would have had much more insight into as a large long-term shareholder and they also had a Board seat) and 3G also benefited from a lower cost base vs where the shares were trading when we reviewed the Company.
2008 Globe and Mail Article on 3G's purchase/thesis
2017 Bell Acquisition Announcement