Walking away from a $6M/y job to build a $600M+ revenue HoldCo. Our take on Röko, Sweden's newest unicorn

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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Imagine being pitched an investment strategy that entails buying 33 unrelated businesses over 6 years. Let’s throw in a ski instructor school; a manufacturer of lubrication systems for conveyor belts; a craft brewery; and a menswear fashion brand. 

Better yet, let’s choose highly competitive markets: Britain and the Nordics. 

Finally, the sole exit strategy will be an IPO!

Would you invest? Better yet, would you join as a co-founder? 

My guess is, probably not.  

In which case, you would have missed out on Röko, the latest Swedish serial acquirer to go public. This Tuesday, Röko listed (link to the IPO prospectus) at a $3B valuation. According to our calculations, the early investors crystallised a 10x windfall:  

How did this happen? In 6 years, Röko morphed from a startup to a $600M+ revenue holding company:

This, with a central team of 8. Tomas Billing (Chairman) and Fredrik Karlsson (CEO) are each sitting on stock worth c.$290M (based on the IPO price). 

$80M for the Deputy CEO / CFO Johan Bladh (age at joining Röko: 30!). 

$40M for the Investment Manager UK & Norway / Head of B2B Anders Nordby (age at joining Röko: 34).   

Since Röko is virtually unknown outside Northern Europe, we summarised it modus operandi in 5 chapters:

1. Röko’s backstory

2. Röko’s investment strategy and Röko’s key metrics

3. Rollovers and put options: Röko’s arsenal for keeping the founders onside

4. Acquisition deep dive: how Röko cornered the Scandi graduation cap market

5. The most curious thing about the Röko IPO  

This article was compiled solely using public sources: the IPO prospectus; the interviews we found on Youtube and elsewhere. If you are looking for a comprehensive “Röko primer” check out this writeup from the Swedish business daily Affärsvärlden. 

1. Röko’s backstory

Röko’s founders Tomas Billing (Chairman) and Fredrik Karlsson (CEO) are in their 60s, having sat at the apex of the Swedish business elite for decades. 

Tomas is the former CEO of the giant family conglomerate Nordstjärnan. Fredrik is the mastermind behind Lifco’s compounding miracle (which we covered here), having run it for 20 years. Fredrik and Tomas partnered after the former was let go in 2019 following a disagreement about compensation. 

The duo kickstarted Röko with SEK 256M, or $17M, of their own money. Another SEK 2.5B came from approx. 130 Swedish HNWIs. According to the IPO prospectus, the largest were: Felix Hagnö, an early investor in Spotify; fund manager Adam Gerge; and Santhe Dahl, the founder of Vida AB, one of Sweden's largest suppliers of manufactured products. The fundraise took 3 weeks from start to end! 

Let’s pause here. The guys could have easily found CEO jobs paying high single digit million. After all, Fredrik’s final comp package at Lifco was SEK 58M - or $6M+ (source). Hardly a pittance. Why bother? Let’s hear it from Fredrik: 

With this kind of attitude, plus $300M in the bank, Röko was off to a flying start, completing 4 transactions in the first year alone. 

Now, let’s take a look at what Röko has bought, and why.  

2. Röko’s investment strategy and key metrics

As a “forever owner” with a decentralised structure, Röko seeks out small (€2-10M EBITA / 10%+ margin) businesses with 10+ years of consistent profit growth. 

Family owned businesses undergoing succession represent a lion’s share of the 500-odd targets that Röko screens yearly.  

On average across its 33 acquisitions to date, Röko has paid 7x EBITA and 1.3x sales. Except for add-ons, Röko never acquires 100% (more on that below). It has the flexibility to lever up to 3 turns, as long as cash flow after amortisation does not fall below 60% of EBITA.  

The industry is secondary as long as the company is a market leader in its niche with low customer concentration. A glimpse at Röko’s portfolio reveals industries as diverse as:

• Rocket Medical: a designer and manufacturer of single-use medical devices

• Les Deux: a menswear fashion brand

• Snowminds: a provider of ski instructor trainings

• CHP: a developer of lubrication system for conveyor belts

• AJAT: a designer and manufacturer of uniforms and student products. We will double click on this later!

The geography is not. According to the prospectus, in 2024, 1/3 of Röko’s 2024 revenue came from the UK. 1/3 from the Nordics. 1/3 from elsewhere, including the Netherlands, Australia and the US. 

Like other Nordic serial acquirers, Röko hasn't had much traction in Germany, Europe’s largest economy. According to Fredrik, this was deliberate. Lately, German SMEs have been reeling from the twin shocks of the loss of the Russian market and the sputtering automotive industry. Similarly, the US is a non-starter due to travel and management complexities. No such concerns in the UK, where the uptick in capital gains tax boosted Röko’s M&A pipeline. 

The upshot is a conglomerate producing $600M+ in pro forma revenues with a consistent 20% operating (EBITA) margin and close to 90% operating cash flow conversion:  

3. Rollovers and options: Röko’s arsenal for keeping the founders onside 

On average across the portfolio, Röko owns 75% of equity. The founders and the management own the remaining 25%. That way, incentives are aligned. Over time, Röko expects ownership to increase to 85%. It can get there by exercising the call options - and the minority shareholders can exercise the corresponding puts. The options typically come with a 5-year term. Strike prices are based on rolling 3-year EBITAs. This is all based on the prospectus. 

In calculating the compensation, Röko takes into account a 12 or 24 month average working capital position to ensure that the management isn't screwing over the suppliers to temporarily boost cash flow. 

Occasionally in uncertain circumstances (e.g. COVID-19), Röko has used one-year earnouts, but generally it seems to avoid those due to risk of misalignment. 

What about Röko’s own management team? According to the prospectus, Johan (CFO / Deputy CEO / Head of B2C) and Anders (Investment Manager UK + Norway / Head of B2B) are entitled to cash bonuses linked to the acquired EBITA. All in all, over $700K over the last 3 years.   

4. Acquisition deep dive: how Röko cornered the Scandi graduation cap market

For all its Swedish HoldCo pedigree, Röko is an outlier in a couple of ways. Firstly, the all-male management team gives off strong varsity vibes (see here) in the otherwise sterile, borderline androgynous Swedish business environment. Secondly, the decision to push ahead with the IPO faced with 0 domestic institutional demand from what we can see. Thirdly…its penchant for consumer businesses. 

Here’s the story of how Röko cornered the Scandi graduation cap market. 

Every spring for days on, truckloads of exuberant (and often heavily inebriated) high school graduates parade the streets of Northern Europe. Fuelled by social media, graduation party budgets have skyrocketed according to the Swedish media. Flatbed trucks. Speaker. Flamethrowers! The priciest item? The ubiquitous graduation cap.

It is highly likely that the headdress in question comes from Ajat, a Röko owned business since 2022. The Denmark based Ajat controls the market leading brands ABC Gruppen and CL Seifert. Ajat has a “90% market share” in Norway, Denmark and Sweden (source). In 2024, CL Seifert expanded to Finland by acquiring the market leader Fredrikson. 

What can we learn from this $20M+ revenue rollup? Here are 3 core insights. 

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