How 4 Swedish Serial Acquirers Scaled To a 49x P/E Ratio | Niklas Sävås Interview

0:00 my guest today is Nicholas Savas from red eye I don't think there is a person in this beautiful world who who has met studied and read more about serial acquires than you Nicholas so thanks a lot for coming to the podcast you're too kind it's a pleasure to be here thank you let's start let's start from a journey from all the way from University to to Redi what exactly are you doing and what have you been doing yeah sort

0:27 of a a bumpy path I mean I went to University back in 2008 graduated 2011 started to work at at swedbank one of the largest banks in in Sweden and I had my sites to become an equity analyst already then but I I started in an area called collateral management so very different from that but I sat quite closely to the equity analysts and after a while I just realized that the the bank wasn't really they were

0:58 decreasing the number of stuff in the equity analysis area and I just found it hard to to get in that instead I I more or less worked in in in the department I I started with started to do more business development and after a while I I realized that I needed a change because I mean being at a big bank it's quite bureaucratic you you have a hard time getting your IDs through and so on so I actually joined a

1:25 a crypto company for a few months which sounds quite strange at this time and and very different from from my thoughts now but I I actually resigned after one month and and that maybe says it all and then I started my own consultancy company and did that for for five or or almost six years and it was quite successful and after like five years I I had my first daughter and on my spare time which I usually put a lot I

1:58 mean doing research on on companies and and Investments and so on my spare time was almost gone so I realized that okay now I have to work with with this otherwise I will be I will be bored I will be sad in the end if I can't pursue my passion and the the CEO of Red ey contacted me because I was writing for a Blog called investing bythe books.com where we read books and and review books and he want to do

2:28 something with us and a podcast came up and I got the chance to do the investing by the books podcast by red eye so I I I jumped on that chance and also became an equity analyst then that's more or less the the background and and after a year or so after doing analysis on different types of companies because I mean red ey is quite broad we do sort of cover tech companies life science companies and and many different

2:54 types of companies and I just realized that okay now serial acquires is something that's close to my heart I mean I understood the model quite early and we had a few companies we I mean that we did research on and so more or less I did a move to to try and and and be the main analyst for a few of those companies and I I yeah that that worked out and we started to do sort of a bigger job on

3:22 on the whole sector covering them I mean all the seral quaries in the nordics on a quarterly basis we we cre this event that has been growing very much I mean we could go in deeper into that and and more or less after around three years now of quite deep coverage of the sector and and my background as an investor and and having focused on on these companies before I think we have we have come quite far but but

3:49 we're still scratching the surface in in my view let's try to First understand the Swedish serial acquired model because people and investor investors and many of them has been even my podcast guests they've traveled all the way from Australia us other countries from from Europe all the way to Sweden Stockholm two events to meet you and the the founders and investors of those serial acquire companies to just learn what

4:19 you guys are doing and why have you been performing so well so what makes Swedish cial acquires unique compared to those in other regions so I think I think I mean just just to begin I think it's sort of a great Testament that people do the pilgrimage to to Stockholm every year now and and we have a lot of people joining our conference in in March and this year we will have around 30 companies and and I think

4:46 maybe 200 people in the crowd so and as you said I mean people are flying in from all over the world and I think I think Sweden has a rich Heritage of U sort of Industrial company and U and managers who have been running decentralized operations for a long time I mean there are a few names that I could I could name I mean the sort of the Electrolux troa we have I mean Carl benett who came from that

5:17 and and now is the of course the main owner of Lico the Berman and beving companies with Andes buos son in in the lead he understood this model quite early and and sort of Le reamped the the bman companies so I think there is a rich Heritage of of strong management who understands the decentralized model and many of them realized quite early that they ran good companies which spit out a lot of cash flow and they realized

5:45 that they could use that cash flow to acquire other companies I think that's sort of the base of many of the Nordic success stories that they started as operating companies and realized that they could add Acquisitions to to it it's not that they sort of did the private Equity model of of raising a lot of capital and and started to buy companies it's the other way around and those have been actually the most successful ones I'm not saying that the

6:08 other model couldn't work but I think that's quite a big difference from from what I see with other companies that I mean the Bas is to be sort of an operating company who then started to acquire companies otherwise I think the modeling I mean we could go deeper into into the model per se but I think it's it's not super different I think one maybe one difference is that synergies is sort of a a curse word I mean that's

6:34 not something that that these companies talk about even though there are sort of some light synergies who call can call them synergies they're not pushing them on on subsidiaries never so I think that's quite a big difference when it comes to Capital allocation what is your thought like you mentioned they're using this free cashlow to acquire other businesses why don't they just improve the current platform to just expand or socaled organically why have they

7:04 chosen the way to to grow through m& on on holding company wise does it is it because of there isn't enough potential when it comes to the main platform or there are just so many great companies they could invest by by using this cash flow what is what is your thought on this Capital allocation and compounding Capital through acquisition so look I I think Priority One for All these good companies is to

7:34 improve the businesses and grow organically it's just that if you if you buy a company small company with a high market share in the sector you don't I mean it's hard to grow for the first thing I mean to grow is quite competitive I would say U but you have a really stable position and I mean you won't lose your market share so I think when these companies see an opportunity to grow organically I mean they would definitely do it because the

8:01 return on investment is is often much higher if youd grow organically it's just that it doesn't cost so much and and these companies release more cash flows that than they need to grow organically so I think so more or less the second pillar is to grow through Acquisitions but I think I mean many of these company if you talk to the management teams they would say that I mean grow organically is what we want the most but I mean that's that's a

8:30 problem with many regular industrial companies that that are not pursuing m&a is that I mean they could reallocate a lot of the cash flow or a bit of the cash flows to grow organically but definitely not all if they would put more money into that the return on investment would go down quite a lot so I think that's more or less talking about organic growth I've been doing lots of research on Recco because it's been like an insane success story

9:00 they've grown they bought like 27 businesses majority Acquisitions just eight people in the HQ and the CEO Frederick Carson I'm pretty sure he was he was the second most important person in in Lio learning from car Bennett right he was doing this there and then he qu he started his own firm and got an investor from I think the CFO of X CFO of Spotify so coming back to this he has said that it's good

9:32 enough for us if organic growth is 1% and I think I've been reading the letters it's been like 1 or 2% it's never been 10% so even though they have like 27 portfolio companies shouldn't it be higher and yeah I I think like this I mean 1% is I would say that to grow a bit more than GDP growth is probably what they what they look for so I don't know GDP plus 2 3% I think they would

10:02 they should do that just through increased prices because I mean Freddy Carlson just I mean he he understands this model really well and and one thing that he will tell his business units is to try to raise prices all the time so I think I think 1% is I mean if that's been the case for the last few years that's due to the weak economy more more than anything else I think they have a higher ambition than than that mhm so so

10:29 what are the you've seen so many of them 30 30 of Serial acquires coming to red red ey serial acquires 20124 event more than 200 people what are if you can say like some of the core principles of of of the best Swedish serial acquirers and what what have you seen I think there are a few I I think what I said there in the beginning that most of them started as operating companies and they they Grew From that I mean they

11:00 have a long long history many of them or all of them actually that's been really successful strong Heritage they never sort of overextend they don't do these large Acquisitions they don't put up too much depth I mean one thing you could see is that in the hype of 2021 when this sector was super hot I'm not saying that it's it's not hot now because it is but but then it was crazy and they got a lot

11:29 of questions from investors that I mean why don't you buy more why don't you increase the pace and they just stay the course and they've been I mean richly rewarded for that because of course there is a risk in that sentiment that you do some bad Acquisitions and I think you can't do more than maybe one in 10 that that is bad because then it would take too much management capacity and of course you R you risk also that you

11:54 don't release the cash flow you need in order to get the I mean keep keep the engine going so to speak and what's your thought on how they are able to maintain such a strong PE ratio I mean I'm looking at Lico stock at the moment and p ratio is like 49 it's it's it's pretty crazy and it's almost doubled since 2022 so it's yeah so I think more or less the 5year average may be in the

12:26 I don't know 30 35 range or at least I I would say that's the maybe the 10e average but I think it's been the per has been between sort of 30 and 50 for the last 5 to 10 years and more often in the 30s I would just say this of course it's if you look at the history many of these companies have compounded earnings per share by above 15% for 20 years and if investors start to think

12:55 that okay I would I would think that this would continue for 20 years then you could pay a really high multiple for that so I think the high p ratio is more or less a resemblance that investors believe in the long-term story that they will continue to compound for the long term and when I mean talking about that I mean it's of course if you pay a p 50 you have sort of a multiple contraction risk because it needs to continue to

13:22 compound at this rate and be quite stable for for the long term but it's it's of course it's a testament that many investors have realized that this model is great if done right now we're talking a little bit about their acquisition strategy because doing they're doing a lot of those and they're deal making maybe you can give some of the examples like what's the ideal company profile for some of those companies like what type of businesses

13:50 they are looking for sizewise growth wise Niche wise I think there are maybe two categories first of all I would say sales of between maybe 50 to 500 million Swedish so up to almost 50 million EUR that's quite rare I mean above above like 30 million EUR in some climates you have a lot of competition from from private Equity then but there has been sort of a window now for the last maybe

14:22 two three years that private Equity hasn't been as aggressive so many of these seral acquires have been managed to do it a few larger deals but I would say The Sweet Spot is maybe in the sales of of5 million e up to 20 maybe and I would say if they could they would definitely try to buy sort of businesses with structural growth behind them so businesses that have been growing for I mean in the history and and has a good

14:50 good prospects to continue to grow with of course strong cash flows and and high return on on on Capital but it's hard to find if if you try to buy maybe 10 to 20 of those companies every year it's hard to find sort of 20 Stars so they settle also with sort of cash cows that they could maybe buy for a lower multiple that won't grow as much but will release good cash flows and and also have low Capital needs so I would I

15:19 would put it in in in those two categories and and at all times of course defensible defensible positions High market shares in in a geography or a SE is is definitely keys so it's it's seldom I would say that they buy a company that's not I mean top three in a certain Niche so even though the strategies are probably different when we compare different buyers but what have you seen like what is the usual structure of the deal and how

15:51 do they finance the Acquisitions like do they prefer cash stock depth and how much of it and what is the ratio yeah I would would say often it's sort of 50% from their own free cash flow and then 50% depth so they keep the depth level stable on a relative basis but but usually they prefer to pay in cash and not raise Equity we have a few examples where will companies use equity but I I think that's not sort of the base

16:23 sometimes the companies raise Equity sort of before or after they do an acis but not sort of that they pay with with shares to the to the company that they buy that's not so often the case and then typically I mean it's been more and more more frequent that they leave a minority so that the either the sort of the the entrepreneur that sold the company gets that Minority or they give a minority to the new CEO because if

16:53 there is sort of a succession you put a new CEO in place sometimes you give that o and and management team part of the equity to sort of sit in the same boat as the as the seral require and then typically you have an earnout which are between maybe one to two years of them and that's more or less just to close the gap between because the entrepreneur will always say that we will be able to

17:18 deliver something great and the buyer of course thinks that that's maybe a bit stretched but we can we can sort of close the gap by having an earnout instead of paying every up front and do you have any statistics like it's all great on on the paper like but what about the post Acquisitions have things always gone as they expected have you do you have maybe some some stories or statistics of out of 10 Acquisitions maybe one maybe doesn't go that well and

17:49 they need to spend like tons of time on on this and this maybe affects their next Acquisitions or do have any any news any statistics any information think I mean it's more hear say than anything else but I think many say says that okay maybe one in 10 doesn't go according to plan and then I think what the good ones have understood is that I mean you shouldn't put too much effort into into those so of course they try

18:16 to I mean they put more effort in sort of improving the bad businesses that's always the case it's hard to not not do that but I would say that many of the good ones I mean they're not so patient with bad results so they will be quite quick in maybe setting up a new strategy and following that that following that closely and if if that doesn't work then often they put in a new CEO and

18:46 sometimes sometimes they merge the company into another business un business unit and and so on so it's I would say that they they don't accept a company that underperformed over year I mean year after year then they put efforts in place so I mean that's the case with this we talk about decentralization and they leave a lot of sort of autonomy to the entrepreneurs but they are they are also I mean they're following these companies on a monthly basis they have

19:14 maybe four board meetings every year and they stay close to the to the companies and yeah they're not they're not so patient with with bad results I would say what are the biggest struggles when they they're going through and maybe when you have met the met the GPS met the investors what they have been sharing to you like what is what is the biggest headaches and what is what are the yeah what are the struggles on the day to-day week to week

19:42 of what they're I think it's people get the right people because if you buy companies that are I mean on the countryside not as big it's hard to do successions it's hard to find the right CEOs and if you miss that if you if you choose the wrong one then you lose Maybe two years so I think having that sort of ability to find right managers which is really hard I don't I don't know if anyone has sort of a

20:07 secret source for that that's I think the biggest headache for for these for these larger established Cal acquires and what about the synergies and how do they integrate those acquired companies without disrupting the the operations of like they have many of them like I think Lico has like 100 plus companies or even more I mean they don't integrate them I would say first they they they give them sort of okay that this is how

20:39 the reporting should be now you should send this report on a monthly basis we will be on the board they of course teach the company the operating model that they have sort of how should we think about everything from cash flow management to pricing and sales training and and so on so they have these programs that the companies can learn from but otherwise they don't do any sort of work with synergies they don't have any big team that comes in to

21:10 the to the company and and sort of ramps the strategy of it and and so on they think I mean they buy it because it's a great company and they want to keep keep it like that and and they know that if they would put in a big team they could destroy the culture of the company so and going even maybe more specific when it comes to post Acquisitions post acquisition how many changes they usually try to implement

21:36 with if any within the first maybe half a year or a year or yes we talked about Reco and the number one goal always is to just increase the prices of of the products and services but what else no I think the on the prices I think many of these companies they buy they they have cost-based pricing and what the seral acquires want to do they want to change that into value based pricing and that's an effort that likely takes a few years

22:03 it's nothing that that goes quickly I would guess that I mean the first the first half year or so it's mostly about sort of getting the reporting in place and step by step sort of I mean in the early days of course agree on a strategy both short and long term and then just following the company on a monthly basis and and be on the board and help them as much as they can but it's it's

22:27 not sort of a huge integration work it's I would say the the teachings and the lessons and so on maybe these companies have sort of sales training two year two times a year and and training for sort of cash management a few times a year and it's not so much more than that and then they maybe meet physically with all the companies once once or twice a year so it's m may sound a bit sort of basic

22:54 but I I would say that's that's how it how it is and what about the competition or deals lots of lots of capital lots of people wanting to acquire those great businesses what have you seen what have you heard yeah so definitely different in different markets I would say Sweden has been really competitive and to buy sort of a quality company in Sweden if it's an auction process then that would be quite competitive and and I

23:25 would guess many of these larger requires would would would hear about it but then there are these cases where they have been meeting the entrepreneurs for for 5 10 years drinking coffee talking is is this the right time to do I mean to sell the company or not and then it's very I mean a lot of that is sort of people dependent and and having a good relation relationship and so those acquisition Acquisitions definitely come from time

23:52 to time as well so that you have that pipeline that you're nurturing over the long term but then I would say that a reason why many of the Swedish acquires have been going abroad is I mean one thing is that they're getting larger they need to do more Acquisitions and the pool of potential candidates in in Sweden and the nordics isn't large enough so they have been expanding to the UK I think Norther Northern Italy and also sort

24:21 of the Benelux countries and I think that's sort of increasing every year and we will see more geographies that that these companies will enter I think Germany has been sort of a an area that many many companies want to get into but they haven't done a lot of Acquisitions in in Germany so far MH and how is it typically I know reading the annual letters and quarter letters of Recco and doing the research they only have like eight people in the

24:53 HQ and while managing like 27 companies and the companies are not even in all in in Sweden they're all over the place in I think UK Denmark Norway first of all how do they do it what's what what are your thoughts how are they so efficient and number two what is the is it typical and are are all those crl acquires so good that they can manage a large portfolio with just so so few people in a head headquarters yeah I

25:24 would say the good ones definitely have a small headquarters but I would say like this I mean one sort of business area manager could potentially handle up to 10 companies so if you have around 30 companies that would mean maybe three business area managers that have the responsibility for for for those companies then of course I mean you need a CEO you need a CFO you likely have an head of m&a is quite common and

25:55 then you you need sort of a reporting economy team and then could be partly outsourced or or not and then typically you have at least I mean one who is skilled in in law I mean m&a law so I think one thing is some of these companies have maybe m&a Scouts and and and some don't some some have sort of bigger responsibility for the business area manager to scout for deals and otherwise rely on on brokers

26:28 so that depends a bit but I think all of these companies have understood that you should keep the the sort of the HQ cost at a low level as low as you need so they don't have any they don't have any team so if something goes wrong at a subsidiary they have don't have the resources to to put in a team they instead work on on sort of on the board level and and also of course

26:54 assist the companies on a regular basis but I think they they they would rather than change the CEO and see how it goes than than sort of put in a team which company have you studied the most have you read the most I would say log CRS because I'm the head Analyst at at rad for for loog CRS okay and what what their strategy what exactly are they doing how has been the last five years how how you think it's going to be

27:22 the the next five years so I mean the background there is that I mean it's it has a her from bman and beving it was spun out of of the mother ship in 2001 and they had a hard time at that moment because they were big in sort of telecommunication distribution and and electronics and after the it crash many of these companies suffered so Jurgen VI became CEO I think around 2005 2006

27:53 and he had been at bman and beving before he had ran his own price consultancy company so he was really skilled in in pricing and first couple of years it was more or less just getting the the existing businesses up to profit margins that that could support a growth journey ahead so they that they could release enough Capital to grow and then after that it's just been a long story of

28:23 buying better and better businesses higher margin businesses more own products so before before I mean they had more or less it was more focused on distribution and they've been buying companies with their own Brands and I would say it's been it's not been a rapid Pace it's been a pace that has been supported by their own cash flows they've never issued equity and they have just been using that that cash flow to to grow through Acquisitions I would

28:52 say they kept quite a steady pace and then I would say the last sort of maybe three years I think they have increased the pace of Acquisitions a bit they had maybe a bit too conservative leverage now they're still conservative but but it's gone up a bit and and they've been doing a few larger deals that has been super successful I mean they I mentioned before that sort of private Equity may have eased the I mean they're not as aggressive anymore

29:22 so LR has done quite a few a bit larger deals not big deals but but quite large deals from a historical perspective that seems to have been really successful at the same time I mean they have also suffered a few the last few years with lower organic growth which comes after a time of really high organic growth I mean due to the inflation that we had and the good companies they were really early in raising prices so

29:50 they they I would say many of them actually benefited from the high inflation they didn't suffer too much which also I think is a testament that you have big businesses with with good pricing power how many Acquisitions they try to do per year I would say 8 to 12 is their target depending on the size I think they've done around eight for the last 12 months but it's been larger than before so I mean the growth through

30:14 Acquisitions in the last quarter was 16% year of year so they have definitely ramped up the pace I would I would guess that that would sort of revert down to maybe 10 12% per year and and you add a few percentage Point organically that's that's how they have have been doing it before and I mean they have been growing earnings per share by above 15% for the last 20 years one thing that is surprising for for Americans for example

30:43 is often times the acquisition multiples so what's that it's it's so high in in Europe so what has been the the acquisition for acquisition multiple on average for logger CRS for the last 20 years it's been around s mhm between six and seven I would say has been the the case I would guess that in the beginning it was more close to 5 six and now it's I would say maybe 6 to S it's not been

31:13 increasing a lot for L CRS they have been really strict in in what multiple they pay overall I think the whole the whole group of companies say that they pay maybe five to eight times I would say that it's more often Maybe six to eight but U it also depends on the size if you buy a larger company it would definitely be in the eight maybe eight up to nine range but they understand that if you start to pay more

31:41 than that sort of the model breaks down then you won't reach the the growth that you need because it's if you don't have a company sort of that that that has really high growth prospects but the problem with sort of buying a company with really high growth Prospect is that it's often more susceptible to competition so you don't get anything for free in in this competitive market I would say if the structural structural growth is is high that

32:09 typically means more entrance will will come in the future what is the ratio is there more more capital and more buyers or more great businesses why it's gone up you mean or I mean the current stage on the market when there is yeah I would say like this it seems like I mean of course there are new businesses starting every year so you have a steady inflow of new companies that could be interesting in the next 10 years to buy I would say

32:43 that as you don't see the multiples going up and you see that these companies buy enough in order to sustain their growth I would guess that at least for now the there are enough candidates and the competition isn't too high in the market so but that's something I always keep track on it's hard to say that I mean there are of course thousands and thousands of companies out there if you look at sort of market research and so on but I I don't give

33:11 too much to that I mean first of all then you you of course include companies that are already part of a conglomerate secondly it's hard to know how many of those that are really interesting for for these serial requires they are quite strict in their CR criteria so I would rather just follow sort of the market from a micro perspective see what sort of how the multiples turn up how many Acquisitions they're able to do what they're

33:39 signaling to the market and so on that's what I follow typically and I don't see a big change in the last few years there was a top in 2021 where multiples went up especially in Sweden but that's been easing down and now it's back to normal I would say what have you seen like when is the moment that like going to a New Market New Country like starting from focusing only on Swedish companies then okay I don't know we

34:05 couldn't find anything or we we bought already many of them so to to to decrease the risk let's go and look in in Denmark Norway UK when does it happen and what what's the thought process behind this what have you seen it's quite a long strategic process it's not something that okay now we need we need more we need to a bigger pipeline let's enter a new country it's I would say they the good ones they are a few years

34:35 in advance so they start to I mean work on their relationships in other countries and and look for often they look for companies that resembles the ones they they already have so that they understand that even if they don't understand the country specifics they understand the market they understand the sort of the company and they have expertise in in that area already in the company so if if they tried I would say it's rarer that they buy sort of a

35:04 completely new company in a new country but it's a long process it's not something that that goes quickly I mean it's a question I always ask because it's it's quite interesting to see how they think about planning for the long term but it's also that they don't go into every country they are I would say they are quite risk averse in in what country they go into they want sort of the industry I mean the the Dynamics

35:30 to be quite similar to the Nordic Dynamics and especially Sweden when it comes to the deal flow and what what have you seen those businesses they come to your events they they participate they read the the letters how many deals are coming straight to them compared to Brokers because I when reading about Recco they built a relationship with thousand plus Brokers yeah so I would I would say that quite a few

36:01 rely quite a lot on Brokers I would say it's hard to set a number on it but I would say more than 50% of deals often come from Brokers then there are a few exceptions of companies that that don't rely on Brokers as much I mean I cover STI Tech at at Red ey and and they they are much more reliant on internal deal flow they have a team that actually calls respective companies that I mean they search for

36:30 companies and I mean they have built up their own database they search in that and and try to get meetings with with entrepreneurs so I would say really rare for them to buy through Brokers so I think and that's a few others also have that others maybe the the larger ones I would say typically rely quite a lot on Brokers and also they rely on their own business area managers for them to come with Deals they don't do sort of they

36:59 don't have a team that cold calls prospective entrepreneurs it's more that they rely on they they have a big Network they have a lot of companies and they try to get them to understand that okay if you find a if you know an entrepreneur you know a company in your Niche that you is well-renowned then try to I mean try for us to have a meeting to try to buy it so looking at the L Grant's stock at the moment in

37:25 2019 it was trading like it was 29 SEC and now share is 227 SE so almost 10 times what has what has changed in in the past five six years and when you look at LIF card it's 566 not but 566 yeah I two things has happened the the kar in terms of earnings per share has been quite a lot

37:56 higher than historically and the multiple has increased so you have both those they have performed super good the last years but they've also get got rewarded for that with a higher multiple so those those are the things and when looking at the smaller ones how often and what is the desire for them to go public versus not going public and staying private does it give them advantage or could get them sort of an advantage in lowering financing cost and

38:28 strengthening strengthening their brand I mean brand is quite important I would say and and for entrepreneurs if they if they sort of hear about a company that is public it's it's sort of a then it's likely more trustworthy otherwise sort of if you have the machine going ATU for example they generate a lot of cash flows they're I don't I don't know if they will raise equity in in in coming IPO but I would guess that they don't need

38:58 that it's one thing for the competitive side one thing is brand one thing is maybe better financing options and of course if you have sort of owners in a in a private company you don't have you you don't have liquidity and some investors may have invested on a shorter time Horizon than than forever and then it makes it much easier of course for them to to sell their shares and and to let other other long-term invest s buy

39:28 the the shares one one great thing you said about loger grants was things started to go better for them once they started buying buying businesses which own the brands and own the products I I think there is a lesson there what have you seen is it common for others as well to buy such brands or or their focus are often times just very different compared to in in what type of strategy they have when when they got started yeah I mean I

39:59 would I would say like this from what our research tell it's not been you don't sort of high have a higher return on capital for maybe a distribution business versus a product company Product Company you can have higher margins but it's also typically maybe more Capital expenditures and and so on so all in all I would say the returns hasn't been much better for a product company it's just a matter of buying good businesses and maybe you you

40:29 create that expertise within your company that buy product businesses then you have sort of a recipe on how to work with them and the same with distribution businesses so I wouldn't say that one is sort of per se better than the other I think both can work mixing in other types of companies can be a bit difficult I think if you sort of also buy service businesses then and and contract manufacturers is a different area as

40:57 well where you don't have your own IP those can of course work but it's just a different model I think and and maybe you need different expertise in how to handle those businesses in the right right way I think many of these businesses buy quite similar companies where they can enforce the same principles I would say is a key again when doing the research on Recco and Frederick gson asked from him

41:28 like what are their risks and he said that one big risk is the recession so when it comes to such a diversified portfolio is there any more risks than than than this I think why why he said that that is that that's the major external risk and he's probably quite confident in the sort of intern mitigating internal risks one thing is of course I mean as I said before you do a big deal that doesn't go well he would

41:58 would wouldn't do that I would guess I mean he knows he's too experienced otherwise it's overextend in terms of maybe buying I mean overreach in terms of Leverage and then you have maybe a mild or or a mild recession that that comes from time to time and then your net depth to ebta goes up too much so you can't really you need to stop your acquisition engine we have seen that quite quite a long I mean quite many

42:26 examples of that if have to stop for a year or two the market won't look 10 20 years ahead then so the multiple gets gets crushed if you need to stop that they don't really believe in the long-term story then anymore and you need to sort of show to the market that you are an acquisition machine again and and that you're doing this I mean that you have the compounding that you that you need to see so now a very

42:52 personal question you've been sitting and reading and analyzing all those businesses all those Industries you know the people you know the companies you know the I guess you're sending a an SMS to Fredick Carson he would find half an hour an hour for you to to share his lesson so if you do it yourself like setting up a proper proper business where you start acquiring great companies first of all how would you set it up what industries You'

43:27 focus on and what typee of people you you would try to get to your small head office I would probably copy rco I think they un understand the model really well and I mean if I would start from scratch I would need to raise capital and to raise capital I mean even though you say that I have a strong Network I don't have the experience the operating experience I don't have the sort of the brand that I mean why

43:55 fredi Carlson had I it quite easy to do that is because he had delivered for for 20 years so and he was renowned as a great business leader and you need someone like that so I would rather take sort of the role of of then I mean for example Yan BL who is the co- CEO of U of rco he's young he's really energetic and to have that role is is is maybe a bit easier that you have sort of the

44:25 people that that has the brand has the networks and then you can learn from them but what I also say with r I think they understand that you need to buy sort of slightly better businesses long history of of profitability of cash flow generation High margins because that makes it a bit easier in terms of in a recession and so on you will still be able to defend more the margins much better than if you have

44:54 lower margins and to have the def defensibility that you need also in in recessionary times so I would say maybe those those things what do you think do you ever consider going that round do you have the desire the grit the the will to do that hard to say I mean I'm a father of two young daughters and I I know that at this time I would probably have to give up too much of of sort of the

45:25 family time to do that so that's the good thing with being an an an equity analyst you work a lot but you have quite a lot of freedom when you can work when you can read you don't have the sort of okay now we have a deal here in Germany you need to fly out there and and close it and that means that you can't see your family at the time so I've been sort of working for quite

45:50 some time and I am at a stage in life that I don't think it makes sense I don't know in in 10 years when when the kids have have have gone a bit older and I mean I'm 35 now I would be 45 potentially I'm not saying I will but I think the the probability is a bit higher than I think it's it's a good point you mentioned the the lessons and once you get into this

46:18 you'll get the experience because the number one thing I have on my notes when it comes to Fredy Carson Carson is if you have 30 years experience of doing something it's easier because you know exactly what to do and another thing I think he was offered a stake like lots of people asked like why did you leave Lico because it's it's a great business you're doing well and he said that at the age of 40 I was offered a big steak

46:44 but I didn't D because I had young children and I I had recently bought the house I had loans so I didn't take the opportunity so I think it's never too late the other day I had a Ryan Sullivan from us and he he's been all in like all his life in manufacturing businesses and and he's the hardcore operator and he he got approached by this crazy guy who who said to him and and he proved to him that you can raise capital

47:15 for every deal and he was just selling this idea of we should do it ourselves instead of you just running running a operating business yourself you should acquire one and own one and that's what they did and the point I'm sharing this is he started when he was 48 and today is 53 or 54 So within the last four five six years they've acquired six companies so it's it's never too late and Frederick is I mean

47:48 he started when he was just short of 60 I think with with Rocco so I I agree I mean it's never it's never too late I just think that you need to realize that it's it's not easy you can you can you can get it wrong quite easily by just doing a few a few bad deals and what I said in the beginning even though even though maybe when you're good one out of 10 acquisition don't go well if that's

48:12 the first one that don't go well then you can be then you can be stuck and you you don't go forward so we have seen many private Ser quiries that get stuck maybe if you buy 10 companies and three or four are bad why would anyone put in more money for the machine to get going again so it's it's not easy I mean I have large respect for for these managers who have been doing it for a

48:38 long time and it's quite good also to be able to sit in the back back seat sort of and acquire stakes in these companies instead of doing it on your own because sort of it's it's a lot of work it's it's hard work it's and it's also not at all certain that you will succeed so going back into detail again because you mentioned something very good like getting stuck because of doing a bad deal I think again it was

49:08 Freddy Carson who said that it's good to have shares in hold Coast that are sector agnostic because there is a much more opportunity what is what have you seen when it comes to those smaller private ones who are just focusing maybe on one very specific Niche like do they very quickly in in year three four five getting into a problem that there is no more businesses to buy or no more good businesses to buy I mean that's it's not

49:36 only the case for private ones also for public ones if you are not sector agnostic in the end you run out of of good targets and to grow in the at the rate you want you need to buy maybe bigger businesses you need to pay up and then the model breaks down you won't get the same returns them so I think think being sector agnostic has has that benefit of you will always be able to find good companies to buy and you're

50:04 not restricted of sort of the opportunity sets that that you that you have in a sector okay Nicholas so there's an event coming what is going on on this event when it is and why should people fly all over the world to come and visit you and to come to this event yeah I think it's really it's become sort of the highlight of the year for us here at Red ey so this this time it will be 17th to

50:34 18th of March and we have around 30 companies presenting over two days so around 15 both days and and the first day it's on the 17th it's a bit smaller companies quite a few private ones and on the second day it's it's almost all the large established serlo quaries and I say I mean why should you come you can listen to presentations of of many of these companies online but the network that we have now I mean the

51:06 people that's coming it's sort of super high quality it's a mix of of new operators that are starting out companies that have been doing this for a few years and want to learn and of course specialist investors that maybe have around 10 positions in their funds and do a lot of work on each each prospective investment and are super knowledgeable about the sector so I would say like this I mean Mick you have been at the conference you know that if

51:32 you if you sort of talk to a person there you would meet someone that you find really interesting this is sort of light marketing now here as I'm talking about it but we don't do any we don't do any marketing actually we don't because we want the network to grow organically we want people who really understands and wants to become better in understanding the model to come and we want to feel that everyone who comes adds something to the group we're

51:59 getting larger as I said we're approaching maybe 200 people coming I think maybe we can grow that to 300 but I think more than that then we probably dilute the the quality and that's the most important for us we want to have sort of really high quality group that wants to come every year to learn from each other and and to of course listen to the to the presentations and maybe have one-on ones with the with the

52:25 companies meet some of these Legends I mean Anders Buon was there the last time of course freder Carlson will be there so you're be get log and and and more so you have the opportunity to meet these people who have been really I mean who are the sort of the the leaders in this space in the nordics which which is quite rare otherwise and it is rare because they're just there eating snacks grabbing a maybe a here and you can just

52:55 go there start a conversation and ask about specific things and obviously what has helped and what helped me last time was that I I was doing a bit of research before so it was very easy to start this conversation because it was about them so that's that's I think important as well but they're all walking around and it's it's a great experience yeah last time we had a quite interesting discussion between the paral Maran CEO Lico and Fredy Carlson and and

53:23 and per I'm not saying what they discussed but they had a quite deep conversation about certain topics and you had sort of 20 people who gathered around and wanted to learn from them so it was sort of one of the highlights from from last year's conference okay so was there anything I didn't ask or was because I we I try to go to go through as much as possible because again you are the guy you read about that you you

53:49 do your research all the time and you you live that so is there anything I I forgot to ask and maybe something some some news or or what you've seen or what what has come up or is there anything I think there is always more I I don't think we spoke so much about maybe new and and upcoming serial acquires or I mean that's that's doing it the right way but are are sort of not as known for the for the public

54:16 market and I think I would encourage people to maybe sign up to to Red ey monthly coverage to read our quarterly updates on the sector as a whole you you get a lot of insight there and you get some help in in finding these different companies and and we give you some help in in sort of explaining what what they do differently and and why they are good and and so on so so that's what I would say otherwise I think lot

54:43 of good questions Mick it was I mean a real pleasure to be here I really enjoyed it okay thanks Nicholas and let's talk again in in six months or in 12 months because I'm sure there's going to be lot of lot of newcomers who are today small five Acquisitions later they're not so small anymore so happy to discuss that in the future would be fun thank you Mick have a great day