One Plus One Equals Three Partnership Model
Combine proven management with dedicated operating resources
- Difficulty
- Expert
- Time to result
- ~ongoing to results
- Steps
- 6
- Confidence
- 96%
The model begins by treating the existing CEO and management team as part of the investment thesis rather than an obstacle to ownership. The investor selects leaders with whom it can establish trust, alignment, and complementary strengths, then keeps those leaders economically invested in the company. Instead of merely providing money or periodically hiring consultants, the investor supplies permanent operating professionals in functions such as procurement, strategy, technology, and human resources. Management contributes company-specific knowledge and execution; the investor contributes capital, pattern recognition, and additional capacity. The intended output is a partnership whose combined performance exceeds what either side could achieve independently—the meaning of one plus one equaling three. Management continuity becomes both a selection criterion and an observable measure of whether the model works.
Origin
Michael Fisch described management partnership as a founding principle of American Securities and reported that more than 80 percent of incumbent CEOs remained through exit or continued ownership. Extracted from Masters in Business.
Core principles
- 01Treat incumbent management as a source of value
- 02Select partners who actively want outside support
- 03Keep management financially invested alongside owners
- 04Supply permanent operating expertise rather than episodic advice
- 05Measure partnership success through continuity and shared outcomes
How to run it
- 1
Select a willing partner
Determine whether the CEO and investor genuinely want to work together. Assess values, communication style, ambitions, and attitudes toward outside involvement.
Pro tip Discuss how disagreements will be handled before the transaction closes.
Watch out Financial alignment cannot compensate for incompatible working relationships.
- 2
Preserve management continuity
Retain the executives who built the earnings and operating capabilities that justified the investment. Avoid changing leadership simply to demonstrate control.
Pro tip Make continuity an explicit part of the investment thesis.
Watch out Retention should not become an excuse to overlook ethical or performance problems.
- 3
Create economic alignment
Have management retain or roll over meaningful ownership so leaders participate in both risk and upside. Ensure incentives reward durable company improvement.
Pro tip Explain the capital structure and incentive mechanics plainly.
Watch out Nominal ownership may not create alignment if incentives encourage short-term extraction.
- 4
Map complementary capabilities
Identify where management has strong internal capacity and where additional expertise, data, or execution support could accelerate progress. Prioritize gaps that materially affect the investment plan.
Pro tip Ask management where a fresh set of eyes or extra arms and legs would help most.
Watch out Imposing support in areas management does not value can damage trust.
- 5
Embed operating resources
Assign dedicated professionals in relevant functions such as purchasing, technology, strategy, or human resources. Integrate them with management rather than positioning them as outside inspectors.
Pro tip Use accountable employees who can stay involved through implementation.
Watch out Advice without execution capacity can create plans that never reach operations.
- 6
Measure the combined result
Track strategic milestones, operating improvements, management retention, and investment outcomes. Revisit whether the partnership is producing capabilities and results unavailable to either party alone.
Pro tip Include relationship health in regular operating reviews.
Watch out Strong financial results can conceal a deteriorating partnership until a crisis exposes it.
In the wild
A founder sells control of a growing company but remains CEO and rolls a substantial portion of personal proceeds into the new ownership structure. The investment firm adds procurement and technology specialists while the founder continues leading customers, products, and culture.
→ Both parties remain exposed to the same outcome and contribute complementary capabilities to growth.
A capable management team has a strong market position but lacks the bandwidth to redesign purchasing and modernize HR systems simultaneously. The owner embeds full-time specialists who work alongside executives to execute both initiatives without displacing them.
→ The company improves critical functions while preserving leadership continuity and company-specific knowledge.
Common mistakes
Assuming every CEO wants help
Some leaders want investors to supply money and remain passive; forcing an operating partnership on them creates conflict.
Replacing proven leaders reflexively
Changing the team that generated the valued earnings introduces avoidable execution and cultural risk.
Using detached consultants only
Short-term advisers may diagnose problems but lack the accountability or capacity to carry solutions through implementation.
Is it for you?
Best for
It is best for strong founder-led or professionally managed companies whose leaders want capital and hands-on operating support.
Not ideal for
It is not ideal when management rejects collaboration, lacks essential competence, or must be replaced to resolve misconduct or severe underperformance.
From the transcript
“my favorite equation is one plus one equals three.”
“Can we work with a management team and together be great partners and do something different together?”
“we're better partners for the former than the latter.”
From the episode
Michael Fisch on Private Equity Funds
Michael Fisch