Contortions are required for Cirque du Soleil to keep its magic

When it comes to management challenges, fish fingers and circuses are at opposite extremes: one product is the acme of industrialised food processing, the other the ultimate expression of human creativity and energy. Somehow, private equity has found room for both: last week, Permira agreed to sell Iglo, which makes Birds Eye fish fingers in Europe, after nine years running the frozen foods company, while another buyout group, TPG Capital, led a deal to gain control of Montreal's Cirque du Soleil.

The coincidence made me wonder at the sheer breadth of private equity-owned businesses, which seems to defy the caricature of buyout kings as asset-stripping short-termists, interested only in targets with an annuity-like stream of revenue. But something else links these two apparently disparate businesses. All great enterprises start like a troupe of inventive and inspired circus performers. But over time most end up churning out the equivalent of pre-cut breaded strips of reconstituted seafood. The big question is: how can entrepreneurial and inventive companies slow their slippery slide to a fish-fingery fate?

I do not mean to disparage the creativity involved in food production. Iglo's new owner, Nomad Foods, says innovation is one reason it is ready to pay €2.6bn. A few years ago, when I visited Birds Eye's plant in Lowestoft, on England's easternmost tip, the man in charge would not let the FT photograph his state of the art potato-waffle-packer, he was justly proud of the scanners that screen out dodgy-coloured peas before processing, and he was trialling new ready-meal combinations. But such incremental innovations are a long way from the original breakthrough of the eccentric Clarence Birdseye, who in the early 20th century, inspired by how Inuit people preserved the fish they caught, invented a way of processing flash-frozen food in bulk and thus launched a billion microwave television suppers.

Birds Eye sold out to the Post food empire and Goldman Sachs in 1929. It is hard to tell whether it was a critical turning point in how the business was managed. The founder was always interested in mass manufacturing and continued his innovative research. But the parallel with the dilemma that has faced Cirque du Soleil co-founder Guy Laliberte is intriguing and instructive.

Mr Laliberte wanted to keep control. He plays a lead role in management case studies, from Blue Ocean Strategy to Harvard Business School, based on how he and colleagues revived the tired circus format in the 1980s, with a new spectacle based on human skills and theatricality. He has long employed outside directors for the shows, but has a strong say in what they produce.

When you are the creative driving force and majority owner of any business, all interests are aligned. Mr Laliberte will stay involved after the sale. But the fear is that Cirque has taken a step down the tightrope that leads to mere mass production. Ajay Agrawal of Toronto's Rotman management school points out that once 90 per cent of the company has passed to TPG and other outside shareholders, "you can imagine a world where he says 'I think we should do this creative show' and the people who stand to make a financial gain or loss say 'That's too risky'".

Daniel Lamarre, Cirque's chief executive, denies that will happen. He told me the buyers understood they "could spend a lot of time looking at the numbers but if the creativity is not there . . . you are losing everything".

Four things have to happen to keep that aim alive. The new owners must let the group's directors take artistic risks or there will be no business. The creative team must let the owners take steps to ensure Cirque's commercial health, or there will be no art. The managers themselves bear a bigger responsibility now to mediate between owners and artists. All must ensure that the owners honour undertakings to keep Cirque rooted in Montreal, where it has seeded an innovative cluster of some 40 circus companies.

Calculated risk-taking, commercial stability, management skill and a sense of history: these are prerequisites to stop innovative businesses turning into mere same-again production lines. Patrick Leroux of Montreal's Concordia University, who studies circus culture, says Cirque's new owners and their agents in management "have to focus on research and development and the creative core: otherwise it will just be a brand". A bit like Birds Eye, in fact, only with contortionists on the payroll not fish-packers.

[email protected]: @andrewtghill

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