Investment insights on the world’s best serial acquirers and compounders. $BRK $DHR $CSU $TDG $DPLM.L $JDG.L and more. Substack 🔽 Open to DMs & great ideas!
Searching for quality VMS serial acquirers beyond the Constellation Software family $CSU $TOI $LMN?
Look no further than these below-the-radar stocks:
Thread 🧵
Here’s the list of serial acquirers with >10% insider ownership, ranked by last year’s ROE
Swedish industrial compounders leading the way $ADDT $LAGR $LIFCO
If you like Lifco then you’ll want to check out Roko AB
Similar business model and managed by former Lifco CEO Fredrik Karlsson
Due to IPO this year! 🇸🇪
Are you familiar with $LIFCO? A $10B serial acquirer and perpetual owner of niche high quality businesses within three core segments (detailed below). Since its IPO in 2014, Lifco has returned ~9x.
10-year CAGRs:
Revenue +13%
EBIT +19%
ROIC (avg) 21%
According to Fredrik Karlsson, former CEO of Lifco AB, the two best-suited businesses for the serial acquirer model:
1/ Vertical market software ($CSU, $TOI, $VIT)
2/ Aftermarket aerospace parts ($TDG, $HEI)
Any sectors that are missing?
Just found Brett Kelly’s $KPG.AX shareholder letters filled with serious value bombs!
Latest mail references Buffett,
@CunninghamProf
, Constellation Software, serial acquirer’s sources of extraordinary performance,
@chriswmayer
100 baggers and more…
Among other reasons $TOI.V should continue to scale quicker than CSU due to the “significantly more fragmented European VMS market”
More borders, more language barriers, more regulation… more opportunity!
@AA_21000000
One of the most under-appreciated qualities of great serial acquirers?
Providing a permanent home and safe harbour for entrepreneurs to sell their life’s work
Usually more than important than price!
$CSU $TOI $SFT $LIFCO $BERG $LAGR $ADDT $INDT
Thoughtful analysis by
@_inpractise
on not just the value of gross and operating margins but also the variance of those margins over time, and how that feeds through to returns on capital.
Comparing B2B distributors $WSO, $FAST, $POOL and Addtech
$ONEW acquisitions have fuelled growth from 1 to 95 retail locations.
27 boat dealers acquired and 50 locations added since 2017 - a period where they achieved 33% CAGR in revenue and 72% CAGR in Adj EBITDA.
And with 4,300+ dealerships nationwide there’s still plenty of runway
Are you familiar with $HLMA? This British serial acquirer has been an incredible long-term performer, returning 100,000%+ (excl. dividends) since 1988.
→ In 1997, David Barber, Halma's co-founder, long-term CEO and at that time Chairman, gave a speech describing the group's
Interview with
#SDI
Group’s CEO Mike Creedon covering:
✔️Personal motivations, incentive and small SDI shareholding
✔️Comparisons with Judges and Halma’s models
✔️Acquisition DD and operating methodology
✔️Types of niche manufacturing businesses
Looking to compile a list of the world’s best capital allocators.
Ideally track record of 20+ years
Warren Buffett $BRK
Henry Singleton, Teledyne
Mark Leonard, $CSU
Who would you add?
$LIFCO is up there with the best serial acquirers of all time.
It’s excelled in running a decentralised model, harnessing an entrepreneurial culture and allocating capital at increasing scale.
A thorough analysis on its next chapter. Better late than never
@Redeye_
😉
Redeye initiates coverage of Lifco, an increasingly sector-agnostic serial acquirer. We see Lifco evolving to accommodate an increasing number of M&A deals and subsidiaries, boding well for its future growth prospects.
$LIFCO
Surprising, I know, but here’s a thread all about serial acquirers 👏
Acquirers come in all shapes and sizes with no single formula for guaranteed success.
But there are a few common traits the best acquirers share🧵
Brand new UK serial acquirer of niche industrial businesses
In the mould of Swedish powerhouses $LIFCO, $LAGR and $BERG
Great team and ambition - excited to see where this one goes 🇬🇧
$LAGR.B Lagercrantz, one of Sweden’s leading serial acquirers, has posted another strong quarter.
It’s on track this year to meet its 25/26 profit target of 1bn SEK. Just another demonstration of the power of these models if done well 🚀
Excellent synopsis on the qualities of top-performing serial acquirers, with firsthand insight from some of the leading Swedish outfits 👏 Definitely attending the next Redeye event!
Fun fact!
Out of 66 European ten-bagger stocks over the last decade, 7 were serial acquirers from Sweden 🇸🇪🇸🇪🇸🇪
Can you name all 7 of these Scandinavian compounders?
To celebrate 4,000 subscribers, we have unlocked our Nemetschek $NEM.DE article for one week based on our subscribers' feedback.
If you're interested in learning more about the company or our newsletter, please refer to the link in the next post.
Roll-ups and acquirers, such as $CSU, $DHR and
#DPLM
, have good defensive qualities.
They offer downside protection in tougher conditions, and yet still perform well during bull markets.
Hard to imagine why you wouldn’t own them as part of a balanced portfolio!
Part I on this extremely insightful event has just been published. Talking about the serial acquirer model (valuations, M&A trends) and the $LIFCO pitch.
On March 6th, 2024
@Redeye_
hosted its annual serial acquirer event. At Redeye, they provide content which is of insanely
WSE-listed Sygnity
#SGN
making big strides since $CSU TSS division acquired 72% shares.
Company will be kept public and used as an M&A vehicle for the CEE region.
One insider explained how its like buying a mini-Constellation for a very cheap valuation 🤔
Found this fascinating.. particularly how (and why) younger serial acquirers adopt more aggressive acquisition accounting practises than the proven old timers
I can see this coming back to haunt them later in the cycle
$TEQ $LIFCO $LAGR $BERG
New interview with Former CFO at Teqnion discussing Purchase Price Accounting by serial acquirers like $TEQ $csu $lifco
The differences in policies between companies can distort earnings and may prove tricky as organic growth slows
10. $TEQ.ST ($300M) has also become somewhat of a FinTwit favorite, and looking at the their track record and corporate culture, we can understand why. Since its IPO in 2019, Teqnion is a 5-bagger.
Record full year results from $JDG.
In addition to the big acquisition of Geotek:
✔️ organic growth up 8%
✔️ adjusted operating profit up 60%
✔️return on incremental capital @ 21%
✔️healthy order book for 2023
Would like to see more cash retained and less divi though
$LAGR 🇸🇪 just posted another strong set of numbers for Q1:
It includes a 35% increase in operating profit and record EBITA margins
The Nordic juggernaut has hit its target of 1B SEK net profit on an annual run rate basis
Great execution once more 👏
5. $LAGR ($2.2B) is one of the legendary Bergman & Beving companies – an OG serial acquirer. Much like Addtech, Lagercrantz is focused on companies in a wide range of high-tech niches.
Solid trading update from $SFT.L
✔️ Revenue up 40%
✔️ operating profit up 100%
✔️ divested unprofitable units
✔️ cash runway until end 2024
Business model of acquiring quality niche software companies is starting to reap rewards
Swedish serial acquirers in the limelight again thanks to
@chriswmayer
Talking about his visits to the 2 he owns Lifco and Teqnion and the business attributes he hopes will serve them well long term
Bergman & Beving is the OG of Swedish serial acquirers.
New CEO Magnus Soderlind says B&B’s opportunity set is greater than his former company Lagercrantz where he spent 13 years helping drive shareholder returns of 2,300%!
@_inpractise
So $DPLM just issued 9.2M shares to raise funds for - at least in part - the acquisition of Tennessee Industrial Electronics.
In a famous 1997 speech David Barber, founder of $HLMA, said: ‘[If you have a wonderful business] why share the ownership with anyone else?’
🤔
Chapters Group $CHG 🇩🇪
Formerly Mediqon, Chapters is a German group of 33 mission critical service companies underpinned by digital technology. Led by star CEO Jan Mohr who recently featured on the Art of Investing podcast.
€82M revenues, €21M EBITDA
PE’s day of reckoning is here?
Interested to see how much $CSU $TOI benefits in current macro environment, particularly if higher interest rates persist
Juiced acquisition multiples by Constellations PE-backed competitors must be under pressure
Happy that we, Teqnion brought in ~175 Msek in fresh money that will be used for acquiring new splendid companies, without any broker (we keep 99,7%).
Thanks to Akre Capital,
@chriswmayer
,
@Spiltan
, Phoenician and P&R!
$JDG.L half year trading update 🇬🇧
Results driven by organic growth again (up 17% yoy) and a record order book
Geotek weighted towards H2 so more to come
Tremendous business resilience given macro headwinds
Love this highlight from $CSU’s shareholder meeting.
The Board demonstrating their approach to continuous improvement by analysing the competitive threats in different end markets
Wouldn’t mind seeing the report on their learnings 👀
Is this the greatest source of competitive advantage for $CSU?
And does it make up for the scale dis-advantages (capital deployments, hurdle rates etc)?
@_inpractise
$JDG.L small acquisition for Judges
But very interesting in that it’s a bolt-on to one of their existing subsidiaries Dia-Stron
Wonder whether we’ll see more like this? Taking a leaf out of the $CSU playbook?
🇬🇧 FTSE 100 newcomer $DPLM.L reported a strong set of year-end numbers:
✔️ Revenues up 19% (org growth of 8%)
✔️ Adj. op margin up 80 bps to 19.7%
✔️FCF up 36%
✔️ROATCE up 80 bps to 18.1%
✔️ Leverage down to 0.9x
It made 12 acquisitions during the period for a total of £280M
Solid updates from a number of the Nordic juggernauts 🇸🇪
Consistently high M&A activity with a number choosing to fill their coffers ahead of further acquisitions
$BERG $TEQ $LIFCO $LAGR $VIT $SDIP $MMGR
End of quarter and time for another of our serial acquirer updates! As always we comment on a select number of companies and this time we discuss cash conversion and our findings from the book Capital Returns.
My investment thesis on $TOI $TOI.V $TOITF
The first spin-off from $CSU has a demanding heritage to live up to.
With plenty opportunities and challenges ahead, markets are discounting an extraordinary execution.
"When are they running out of companies to buy"?
I often get the question about how long the growth runway is for acquisition-driven compounders and how many companies they can find and acquire.
A short 🧵about the subject.
Latest piece on Swedish serial acquirer Bergman & Beving.
Looks at the impact of the new CEO and the challenges he faces in revitalising the legacy B2B industrial businesses.
Great to hear a high-quality podcast episode all about serial acquirers
@chriswmayer
references some of the best in the business: $CSU $TOI $BRO $HEI $LIFCO $TEQ
Punchy set of results for UK’s
#SDI
Group - a leader in digital imaging solutions.
After recent pullback now only trading on forward 2023 P/E of 14.. not bad for a company consistently growing EBITDA at 50% plus!
Serial acquirers research update from
@Redeye_
Good in-depth review of B&B, it’s recent acquisitions, updated business revenue mix, and positioning for a recession given it’s exposure to cyclical areas of the market
Teqnion $TEQ / $TEQ.ST reported 4Q23 results this morning. See
@alexeliasson
post (below) for high level results. A few other details:
1) 2023 had some non-recurring costs while '22 was boosted by some non-recurring items - if you wish to "normalize" these:
@_inpractise
$SDI.L interview with former SDI Group CFO who worked alongside ex CEO Mike Creedon during Covid
Good insight on:
- Acquisition checklist & diligence
- Business quality & growth
- Accounting treatments & write downs
- Monmouth case study
- Future prospects
Constellation Software report
Margin expansion!
$CSU standalone (ex. $TOI.V and $LMN.V) Q1 revenues up 22% y-o-y, Q1 EBITA up 31%
Total consolidated revenues up 23%, of which 3% organic (constant FX), consolidated EBITA up almost 33%…
Cash flow seems light but that’s timing
The more I look into
@nemetschekgroup
stock, the more I like it $NEM
Quality certainly is there, now for the number crunching part to see if I'll join
@long_equity
@Quality_stocksA
and others as a shareholder
Decentralized structure, disciplined acquisition multiples, dispersed capital allocation, systematic process and cultural attributes.
This aptly describes Roper $ROP but could equally apply to many large serial acquirers
$CSU with plenty of attractively-priced small and mid cap targets in the public markets universe
Not to mention the corporate carve outs! Constellation 2.0 is looking interesting
Constellation Software $CSU.TO has taken an 18% stake in kiwi tech company Eroad and is seeking to buy the remaining shares in a bid valuing the company at $147 million.
Sygnity $SGN 🇵🇱
Polish IT company which is in fact part of the CSI family, being majority owned by TSS / Topicus. Less known that it’s larger cousins, it mainly supplies Polish enterprise and government clients but is expanding into new markets.
$73M revenues, $16M EBITDA
Two impressive facts about great serial acquirers:
1/ Faster growth - growing revenues and profits often 2-3 times as fast as their non-acquisitive rivals
2/ Stronger returns - nearly double the total shareholder returns of their peers over a 15 year period
Vitec Software $VIT-B 🇸🇪
Leading Swedish software group focused on growing SaaS businesses in the Nordics. Current portfolio of 41 companies spanning laundry management systems to equity trading platforms.
$250M revenues, $56M EBITDA
Wonderful illustration of strategic acquisitions of dominant niche companies
In areas of the market where competitive dynamics are not well understood
$DHR $SRT
@SerialAcquirers
enjoyed this interview with the former CEO of Indutrade in Sweden.
A remarkable 22% CAGR for 15+ years and many important insights into running a high-performing compounder.
Constellation Software $CSU $CSU.TO just reported. Looks like another banger quarter from this Canadian compounder. Look at that two month acquisition spend for 2024! Another excellent year in the making.
Bergman & Beving share price development over the last year vs the other B&B constellation companies. What company of the B&B constellation do you prefer at the moment and why?
$BERG $ADDT $LAGR $ALIF $ALLIGO $MMGR
$TEQ Teqnion.
Me preguntáis por privado por la caída de hoy de Teqnion (12%).
Esta es la razón, un “análisis” en un periódico sueco que cree que la acción debería de caer más de un 20% en los próximos dos años, sin motivo aparente.
A ver si el informe tiene fuerza y la deja
Definitely worth keeping an eye on
$SDI reports in May so we should get a read on how bad (or not) things are
My sense is the bad news is already baked in
🇬🇧 SDI Group $SDI.L
SDI (Scientific Digital Imaging) Group is a UK micro-cap serial acquirer. Once a pandemania darling, the stock is now 71% off its all time high of 215p due to a perfect storm of bearish factors:
- an overpriced acquisition
- pandemic overstocking dampening
Technical analysis is not our forte but is that a head-and-shoulders pattern in the Topicus chart?
Could be a drop and buying opportunity below $80 soon.
Strong writeup on
#KWS
another British serial acquirer of the highest quality. Keywords Studios: A Leading Serial-acquirer in the Gaming industry, by
@PartnershipInv
Major acquisition by Judges Scientific
#JDG
representing approx 1/6 of their market cap.
Geotek, a specialist provider of geological measurement devices, is materially earnings enhancing and the first acquisition to derive “a substantial portion of revenues from services”.
👏
@FairwayResearch
The quality of businesses that JDG buys seems to be higher than SDIs. I think JDG has passed on acquisitions that SDI have gone on to make. Will be interested to see if that shows up in your analysis.
Omda AS $6Q1 🇳🇴
Formerly CSAM, Omda is a collection of 15 healthcare software businesses. It’s operated in a decentralised way similar to CSI but not yet profitable. It does have the ability to significantly raise margins in the coming years.
$37M revenues, 27% EBITDA margin
Software Circle $SFT.L 🇬🇧
British vertical software acquirer with portfolio of 6 opcos. It’s still a micro cap under $100M so plenty of room to grow. Recently raised fresh funds for its next wave of acquisitions. Jan Mohr sits on the Board as Chairman.
£16M revenues, £3M EBITDA
Incredible company with remarkable growth in recent years, in large part due to the size (and success) of acquisitions like WCW.
Long term shareholders may have preferred less dilution but I doubt they’re complaining too much.
Profitable, well-run companies: opcos need to well managed and profitable for profits to flow back to corporate for further acquisitions. They can even be enhanced by the backing of a strong parent. Exponents of this ‘buy and build’ strategy include Watsco $WSO and Judges $JDG.
I'm reading plenty of critics about $TOI.V paying $200m in special dividends
C'mon guys, this isn't the first time it's happened
$CSU.TO paid a special div of $400m+ in 2019. Shares x4 since then
Special divs impose discipline on capital allocation. Let them do their thing
6 Boring Quality Businesses 📊
1. DSV
2. Danaher Corp
3. Mettler Toledo
4. Terravest Capital
5. Waste Management
6. Alimentation Couche Tard
Boring is subjective, but these stocks are unlikely to be featured on CNN as "hot".
Let's take a look:
Good insight into Judges’
#JDG
acquisitions and comparison of their strategy and end-markets with those of VMS acquirers like $CSU
Diversification through its portfolio of opcos and increasing service recurring revenue are critical to future returns
IP WEEKLY: Judges Scientific, Geotek, & GDS Instruments
Full write up for FREE
@_inpractise
In 2005, a guy started with a blank check and started buying scientific instrument companies.
17 years, 22% FCF per share CAGR and 81x later, $JDG.LN is a pretty special company...
We’re studying a few UK buy-and-builds like
#JDG
and
#TUNE
.
They make only few acquisitions in a 5-year period but focus on complementary business lines and organic growth at 5-10%.
Is this a less effective acquisition strategy than $CSU or
#HLMA
?
Enjoyed listening to Judges’ CEO David Cicurel discussing:
- first half results (ahead of expectations)
- attractions of the Geotek business (largest acquisition
#JDG
paid 7 times earnings for)