Growth-control (GC) companies are focused on getting bigger while maintaining control over decisions. They grow primarily through their retained earnings, paying low (or no) dividends to the owners. They also have low (or no) external equity or debt, since answering either to outside investors or borrowers requires surrendering a level of autonomy. When outside equity is taken on, it is often done on a limited basis or through dual-class shares that ensure the core owners maintain control (as in Google/Alphabet and Facebook). The avoidance of debt is often a surprise to those used to looking at widely-held public companies or private equity firms, who seek to maximize returns through leverage. For private companies, debt can be useful, but is usually recognized to come at the cost of control. Closely-held public companies will often take a similar view. In its Owner’s Manual, Warren Buffett says that Berkshire Hathaway will “use debt sparingly,” and will “reject interesting opportunities rather than over-leverage our balance sheet.”
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