Redeye 2025 Serial Acquirers Conference - Day 2 notes

Disclaimer: Unless noted otherwise, views and analysis expressed here are the author's own and based on public sources. The article is intended for informational and entertainment purposes only. This is not financial advice. Please consult a professional for investment decisions.

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$60 billion. This is the combined market cap of the 30-odd market listed Swedish serial acquirers. A majority of these companies attended the Redeye conference. Why should you care?

Two reasons.

One, Sweden boasts Europe’s most vibrant equity markets with nearly 1,000 listed companies (source). Put differently, 1 in 10 Swedish companies with 50+ employees are publicly listed.

Two, 80% of Sweden’s best performing large-caps are serial acquirers:

Read on to learn:

1. Nuggets of wisdom from serial acquirer CEOs (and their investors)

2. Röko: cocky or confident? Perhaps both? 

3. Addnode is Autodesk’s No.1 distribution partner globally. Is this a resilient business model? 

Check out the video highlights here.

Enjoy! 

Note: approximate exchange rate 10 SEK : 1 USD

Nuggets of wisdom from serial acquirer CEOs (and their investors)

• Karnell: acquires small and medium industrial companies in Sweden and Finland. Prefer niche manufacturing companies whose products sell for under SEK 5K ($500) apiece. The higher the price point, the more volatile the demand and the higher the capex intensity (e.g. they would not want to be exposed to the automotive industry). 

• Vitec: acquires vertical market software companies in Scandinavia and Benelux. No, you don't need significant investment to get access to deal flow in a new market. Vitec entered Benelux by educating top 30 sell-side advisors on Vitec’s business model. The leads started flowing right away.   

• Momentum: a value-added reseller focusing on aftermarket in industries including power transmission, fluid technology, technical measurement services. Do not like to issue stock. No cash on balance sheet = no M&A. 

• Volati: a building materials-to-labelling HoldCo. Maximise credibility vis-a-vis sellers by (1) leveraging references from exited founders and (2) involving your platform CEOs early on. Bring CEOs to the first meeting. 

• Sator Grove: a US permanent equity investor behind 8 VMS HoldCos including Chapters Group, Upliift and Mosaic Software. Sator Grove backed founders unlock equity over time:  a mix of time based vesting and hitting MOIC targets (note: similar to how Compounding Labs structure deals - check out our deep dive). Speaking of Chapters (yes, we have a deep dive on them too), being publicly listed is helpful from a talent attraction / retention point of view. Employees do not feel like they are locked into a 20 year vehicle with no liquidity. Leverage can fuel an inorganic flywheel - but be careful with it.

• Woodlock House Family Capital. Chris Mayer is the compounder investor par excellence. As he put it: whatever KPIs you set out as a serial acquirer, measure them on a per share basis, plus some measure of return on capital. 

Röko: cocky or confident? Perhaps both?

• What is it? An industry agnostic, decentralised holding company investing globally but primarily in Northern Europe and the UK. Went public last week - check out our recent deep dive

• What’s in a name? 

  • As Chris Mayer joked, “Is Röko Swedish for making a lot of money quickly”?

  • Turns out it is not! Fredrik and Thomas were looking for a name that was short and had a Swedish vibe to it. Since they love sailing, the obvious choice was to name it after an island (a skerry?) in the Baltic Sea.

• 2024 highlights: 17% growth in EBITA, net debt / EBITDA slightly down, SEK 785M deployed in M&A

• Röko vs. Swedish serial acquirers:

  • A great asset class to be in. 80% of top performing Swedish large caps are serial acquirers. Can the good times go on? YES! There are 25,000 companies in the UK, Italy and Germany that suit Röko’s M&A criteria (€10-50M revenue, 15%+ EBITA margin)  

  • Röko is ahead of the pack: it screens well vs peers (Lifco, Indutrade) on KPIs such as EBITA growth, cash conversion, organic growth etc. The only metric where it lags is ROIC. Apparently this is normal: as a young company, Röko will “grow into” ROIC

  • The punch line: Fredrik’s pitch - and therefore Röko credibility - heavily lean on his (spectacular) track record at Lifco. Lifco’s growth has been driven by System Solutions - the third, sector agnostic segment - with a 31% CAGR since the 2014 re-IPO

• How can Röko continue to outperform its peers?

  • Smaller EBITA vs peers - empirically, smaller companies grow faster

  • Deal sourcing on par / better than peers due to the broader opportunity set, which is a function of Röko’s industry agnostic business model (...which works - see above) 

• How does Röko get comfortable with owning consumer businesses? 

  • Student caps is a very stable business - a century long tradition in Scandinavia

  • Ditto for meanswear: 60% of collection goes onto the next season 

  • Having said that, they haven't bought a consumer business in 15 months - don't know how many of these they will buy in the future

• Why no manufacturing companies in the portfolio? These are great businesses because the valuation creation playbooks are straightforward: international expansion and product development. However, these tend to sell for more than what serial acquirers can afford

• Not everything they have acquired has worked out. Changed CEO 3x in one instance. Growth in EBITA for the 3 best performing companies is 3x of growth of the 3 worst performing companies

• “We can do another 28 acquisitions without hiring anyone” into the 8 person HQ team

Addnode is Autodesk’s No.1 distribution partner globally. Is this a resilient business model? 

• What is it? Addnode is a Swedish provider of software and services for design, construction and manufacturing. One of Autodesk’s largest partners worldwide. “Every time you see a construction crane, Addnode is making money”. SEK 8B in revenue and 10%+ EBITA. It has done well:

• M&A playbook:

  • 84 acquisitions since the inception in 2003. “90%+” of acquisitions have been successful. Of the total, 3-4 deals resulting from brokered processes; the rest based on proprietary outreach

  • Recent acquisitions: Congere (digital solutions to the defence industry, $2M revenue); TeamD3 (US Autodesk Platinum Partner, $120M revenue)

  • The Autodesk market is highly fragmented. Even today, Addnode estimates it has 4% market share globally and <10% in the US 

• Is there risk around the Autodesk partnership? 60% of Autodesk’s worldwide sales are through channel partners. This ratio may fluctuate over time. At the same time, Autodesk fired 10% of the in-house sales team 2 weeks ago. “They will need partners like us” 

• Financials:

  • Revenue split (Q4 2024): 62% recurring revenue (not all of this is SaaS), 34% services, 3% licenses

  • The transition from a direct sales model to a commission based model has led to a decrease in revenue -> profit remains unchanged -> margins go up

  • 2024 highlights: 20% EBITA growth; net debt / EBITDA 1.1x; 19% ROCE in 2024