Stockholm trip notes: a masterclass from Swedish serial acquirers

Stockholm’s compact size, waterfront location and easy bourgeois charm make it a delightful place to visit at any time of the year – but particularly right now! It’s still warm, and the Swedish Krone’s enduring weakness makes the city’s eye-watering prices somewhat more palatable. 

Last week, we spent 24 hours in the city, hopping between 1:1 meetings and the Rollupeurope / Redeye networking event for serial acquirers. The trip was off the back of the recent work we’ve done on Swedish serial acquirers, including:

17X value in 10 years…What can we learn from Lifco and other Swedish serial acquirers?

P/NWC>45%: the magic formula from a Swedish HoldCo clan

Q&A with Niklas Sävås, Redeye: Swedish serial acquirers

Marathon’s home advantage

Formerly known as Tempeludden, Marathon Software was founded by Johan Hazelius and Richard Treffner in 2018. To date they have acquired 5 businesses, with c.$10M in combined revenue. The strategy is to stay hyper-focused, keeping tabs on hundreds of Sweden’s small enterprise (between $500K and $2M in sales) software businesses. 

This approach allows Marathon to build personal rapport with the founders – many of whom aren’t based in major cities like Stockholm or Gothenburg – preempting competitive processes down the line. 

This strategy requires a lot of patience. Such patience has been paying off. In 2021, Marathon acquired Login Hasselberg. Login’s most important product is the Garanti XL system, which is used for personnel administration in bankruptcies and company reconstructions. The business is small (c.$600K average revenue, source) – but with only 2 employees it is highly profitable; sticky; and anti-cyclical. 

These findings align with Vitec’s disclosure: in 2021-22, Vitec’s average target reported $7M revenue and $3M EBITDA (c.35% margin), with a healthy revenue / FTE ratio of $213K. 

Attfam’s investment framework

Our next stop was the offices of Attfam Invest, a family office and an early investor in Marathon. 

Attfam’s core principles are:

• Long-term value is created by talented people who are allowed to run companies freely

• It has an endless investment horizon

• It lets portfolio companies be independent and does not try to get synergies between companies

Overlaid with these principles are Attfam’s investment criteria for software consolidators, which its CEO Mikael Tarnwaski-Berlin shared with us:

• Niche focus, staying away from overly competitive verticals

• Robust M&A process. Not overpaying for acquisitions

• Credible value creation playbook with a defined timeline

Johnny Alvarsson: a lookback on 40 years of value creation from M&A

Johnny is the doyen of the Swedish serial acquirer industry, having led Indutrade ($7B market cap) for 13 years. At 73 he remains highly active, sitting on the boards of VBG, Beijer Alma, Instalco, Sdiptech and FM Matsson. 

I won’t recap all of Johnny’s exploits over a nearly 40 year long career building serial acquirers, but the most important thing I took away from an hour-long discussion with him was that sensible decentralization is key to maximising a leader’s output. 

Other takeaways to highlight:

• Applying common sense to M&A. Johnny would bring 5 acquisitions to every Board meeting – before meaningful DD had been completed. Subsequently, he would drop 1 out of 5 deals, most often due to not being able to trust the target’s management

• Not centralizing the finance function or reporting systems. In Johnny’s experience, the benefits of accountability (every business has a dedicated FD / FC who genuinely cares about unpaid invoices) and risk management (resilience to cyber attacks) far outweigh the downsides, such as lack of real time management accounting data

• Relative attractiveness of software vs. product manufacturing vs. trading businesses. Clearly, margins are the highest in software and the lowest in trading. On the other hand, in manufacturing businesses the assets “can be locked up for the night” which isn’t the case for software or installation businesses

• Hire MDs who can be trusted, unlock their competitive instincts. Creating transparency around benchmarking is essential. Firstly, it helps establish an objective baseline – not some distant listed comparable, but other companies in the group. Secondly, no added financial incentive is necessary: it is enough to distribute token prizes. Many software rollups either replace longstanding founders with junior PMs / MDs who can’t perform on the same level – and/or create an unbearable surveillance environment that paralyzes decision making (particularly true for solo founders!)