Click ‘Edit Settings’ to decline these cookies or to make more detailed choices.
When you visit a website, it may store or retrieve information on your browser, mostly in the form of cookies. The information does not usually directly identify you, but it can give you a more personalised experience. Because we respect your right to privacy, you can choose not to allow some types of cookies.
Manage Consent Preferences
These cookies are essential so that you can move around the website and use its features. Without these cookies, the services that ask for cannot be provided. These cookies are on by default but can be turned off in your browser settings.
These cookies allow us to count visits and traffic sources so that we can measure and improve the performance of our website. All of the information these cookies collect is aggregated and is therefore anonymous.
These cookies allow the website to remember the choices you make in order to give you better functionality and personal features.
For many companies, acquisitions are an attractive way to grow. They can provide access to new markets, technologies and people. They also come with potential risks, including acquiring the wrong business or overpaying. There is a breed of listed companies, however, that consistently get acquisitions right and overcome the challenges of acquisitive growth. Some have even made acquisitions their raison d’être.
Call them serial acquirers, portfolio builders, roll-up companies or accumulators, the best ones have been able to create tremendous shareholder value over time. Sweden happens to be a very fertile hunting ground for these types of companies, and they share a number of common characteristics.
Many serial acquirers have a well-defined and consistent approach to acquisitions, which tends to change very little over time. They typically buy owner-led companies with structural growth drivers, a strong track record of profitability, and a dominant position in a niche market.
For example, Stockholm-based Indutrade* recently acquired German company Tecno Plast*, which sells single-tubing sets and silicone hoses to biopharma, medtech, pharma and chemical industry customers.1 The work these customers undertake requires constant replenishment of equipment. As a result, Tecno Plast enjoys a high proportion of recurring sales and cash flow predictability. By targeting resilient franchises and well-run businesses, serial acquirers side-step many potential problems and can instead focus on building on an already stable foundation.
The consistency of their approach not only helps serial acquirers avoid poor acquisitions, but it also helps establish their reputation as an attractive home for private companies. Serial acquirers often nurture relationships with potential targets for longer than, say, private equity competitors. Trust takes time to build. It involves frequent conversations and, in Sweden, many rounds of coffee.
For instance, Addtech* took a decade to finally acquire Fey Elektronik*, a leading German player in industrial battery solutions, in 2021.
I first met the owners ten years ago. After a decade of trusting relationship building, the owners were finally ready to sell their life’s work to Addtech. In the process, we got to know each other well, and we now know what we can expect from one another. 2
- Addtech’s CEO Niklas Stenberg.
Long-term relationships often make serial acquirers the first port of call when a founder-owner is ready to sell their business. Relationships also enable a deep understanding of the business, which speeds up the due diligence process for the serial acquirer and increases the likelihood of a business owner staying on to steward their acquired business through its next phase of development.
Another hallmark of the most successful portfolio builders is a decentralised business model and operating structure. Most serial acquirers take a hands-off approach to subsidiary companies’ day-to-day operations, and exert well-judged influence through company Boards. Occasionally, however, they might step in to help steer a company in the right direction, such as by encouraging the management to step away from markets in which pricing power might be compromised.
A decentralised structure is often also attractive for founder-owners who are contemplating selling their companies. Lifco*, a serial acquirer based 80 km north-west of Stockholm in a place called Enköping, believes its decentralised business model, which allows subsidiaries a high degree of autonomy, “is a key factor when we negotiate with potential acquisition candidates…to sell their life’s work to Lifco.”3 Decentralised decision-making and responsibility helps maintain an entrepreneurial spirit within operating companies, while the parent provides stable, long-term ownership, along with capital for expansion and growth.
Subsidiary companies are also able to draw on the experience and expertise of fellow subsidiary companies, and of the holding company, in areas such as digitalisation, governance, expansion into new markets, supply chain development, and improved sustainability. This can be useful for unlocking organic growth opportunities.
Listed serial acquirers enable investors to back successful entrepreneurs and gain exposure to leading private companies with proven approaches. They also offer the stability that a diversified portfolio of competitively positioned companies brings.
Long-term competitive advantage in a stable industry is what we seek in a business. If that comes with rapid organic growth, great. But even without organic growth, such a business is rewarding. We will simply take the lush earnings of the business and use them to buy similar businesses elsewhere. 4
- Warren Buffett
We view the highest-quality serial acquirers as having a valuable contribution to make to our portfolios because of their capacity to generate stable returns for shareholders over the long term.
* For illustrative purposes only. Reference to the names of each company mentioned in this communication is merely for explaining the investment strategy and should not be construed as investment advice or investment recommendation of those companies. Companies mentioned herein may or may not form part of the holdings of Stewart Investors.
This material is for general information purposes only. It does not constitute investment or financial advice and does not take into account any specific investment objectives, financial situation or needs. This is not an offer to provide asset management services, is not a recommendation or an offer or solicitation to buy, hold or sell any security or to execute any agreement for portfolio management or investment advisory services and this material has not been prepared in connection with any such offer. Before making any investment decision you should conduct your own due diligence and consider your individual investment needs, objectives and financial situation and read the relevant offering documents for details including the risk factors disclosure. Any person who acts upon, or changes their investment position in reliance on, the information contained in these materials does so entirely at their own risk.
We have taken reasonable care to ensure that this material is accurate, current, and complete and fit for its intended purpose and audience as at the date of publication but the information contained in the material may be subject to change thereafter without notice. No assurance is given or liability accepted regarding the accuracy, validity or completeness of this material.
To the extent this material contains any expression of opinion or forward-looking statements, such opinions and statements are based on assumptions, matters and sources believed to be true and reliable at the time of publication only. This material reflects the views of the individual writers only. Those views may change, may not prove to be valid and may not reflect the views of everyone at First Sentier Investors.
Past performance is not indicative of future performance. All investment involves risks and the value of investments and the income from them may go down as well as up and you may not get back your original investment. Actual outcomes or results may differ materially from those discussed. Readers must not place undue reliance on forward-looking statements as there is no certainty that conditions current at the time of publication will continue.
References to specific securities (if any) are included for the purpose of illustration only and should not be construed as a recommendation to buy or sell the same. Any securities referenced may or may not form part of the holdings of First Sentier Investors' portfolios at a certain point in time, and the holdings may change over time.
References to comparative benchmarks or indices (if any) are for illustrative and comparison purposes only, may not be available for direct investment, are unmanaged, assume reinvestment of income, and have limitations when used for comparison or other purposes because they may have volatility, credit, or other material characteristics (such as number and types of securities) that are different from the funds managed by First Sentier Investors.
Not all First Sentier Investors products are available in all jurisdictions.
This material is neither directed at nor intended to be accessed by persons resident in, or citizens of any country, or types or categories of individual where to allow such access would be unlawful or where it would require any registration, filing, application for any licence or approval or other steps to be taken by First Sentier Investors in order to comply with local laws or regulatory requirements in such country.
This material is intended for ‘professional clients’ (as defined by the UK Financial Conduct Authority, or under MiFID II), ‘wholesale clients’ (as defined under the Corporations Act 2001 (Cth) or Financial Markets Conduct Act 2013 (New Zealand) and ‘professional’ and ‘institutional’ investors as may be defined in the jurisdiction in which the material is received, including Hong Kong, Singapore, Japan and the United States, and should not be relied upon by or be passed to other persons.
The First Sentier Investors funds referenced in these materials are not registered for sale in the United States and this document is not an offer for sale of funds to US persons (as such term is used in Regulation S promulgated under the 1933 Act). Fund-specific information has been provided to illustrate First Sentier Investors’ expertise in the strategy. Differences between fund-specific constraints or fees and those of a similarly managed mandate would affect performance results.
About First Sentier Investors
References to ‘we’, ‘us’ or ‘our’ are references to First Sentier Investors, a global asset management business which is ultimately owned by Mitsubishi UFJ Financial Group, Inc (MUFG). Our investment team operates under the trading name of Stewart Investors which is part of the First Sentier Investors Group.
This material may not be copied or reproduced in whole or in part, and in any form or by any means circulated without the prior written consent of First Sentier Investors.
We communicate and conduct business through different legal entities in different locations. This material is communicated in:
- Australia and New Zealand by First Sentier Investors (Australia) IM Ltd, authorised and regulated in Australia by the Australian Securities and Investments Commission (AFSL 289017; ABN 89 114 194311)
- the European Economic Area by First Sentier Investors (Ireland) Limited, authorised and regulated in Ireland by the Central Bank of Ireland (CBI ref no. C182306; Registered office: 70 Sir John Rogerson’s Quay, Dublin 2, Ireland; Company no. 629188).
- Hong Kong by First Sentier Investors (Hong Kong) Limited and has not been reviewed by the Securities & Futures Commission in Hong Kong. First Sentier Investors and Stewart Investors are business names of First Sentier Investors (Hong Kong) Limited.
- Singapore by First Sentier Investors (Singapore) (Company no. 196900420D) and this advertisement or material has not been reviewed by the Monetary Authority of Singapore. First Sentier Investors (registration number 53236800B) and Stewart Investors (registration number 53310114W) are business divisions of First Sentier Investors (Singapore).
- Japan by First Sentier Investors (Japan) Limited, authorised and regulated by the Financial Service Agency (Director of Kanto Local Finance Bureau (Registered Financial Institutions) No.2611).
- the United Kingdom by First Sentier Investors (UK) Funds Limited, authorised and regulated by the Financial Conduct Authority (FCA ref no. 143359; Registered office: Finsbury Circus House, 15 Finsbury Circus, London EC2M 7EB; Company no. 2294743).
- the United States by First Sentier Investors (US) LLC, authorised and regulated by the Securities Exchange Commission (RIA 801-93167).
- other jurisdictions, where this document may lawfully be issued, by First Sentier Investors International IM Limited, authorised and regulated in the UK by the Financial Conduct Authority (FCA ref no. 122512; Registered office: 23 St. Andrew Square, Edinburgh, EH2 1BB; Company no. SC079063).
To the extent permitted by law, MUFG and its subsidiaries are not liable for any loss or damage as a result of reliance on any statement or information contained in this document. Neither MUFG nor any of its subsidiaries guarantee the performance of any investment products referred to in this document or the repayment of capital. Any investments referred to are not deposits or other liabilities of MUFG or its subsidiaries, and are subject to investment risk, including loss of income and capital invested.
© First Sentier Investors Group
Copyright © 2023 Stewart Investors.
Material on this website is intended to provide general information only. Such material does not into account your objectives, financial situation or needs. You should consider these matters before acting on the information and consider the relevant Product Disclosure Statement for any product named on this website before making an investment decision. Any opinions expressed in videos are the opinions of the individual participant and are subject to change without notice. Such opinions are not a recommendation to hold, purchase or sell a particular financial product and may not include all of the information required to make such a decision. Before making any such decision you should consult a financial adviser.