From Sweden, With Love

From Sweden, With Love

Trip report - September 2024

One could be forgiven for overlooking Sweden as an investment destination: its total population numbers 10.5 million people, less than the population of Paris (c.11.2 million) and barely double their own count at the end of the 19th century1,  and Swedish stocks comprise only 5% of the MSCI Europe Index.2 Yet our trip to Stockholm in September reaffirmed our conviction in the treasures Sweden offers to the world – ideas, products, and people. 

Good Swedish ideas may be historic in origin, but are resolutely contemporary in application. Bergman & Beving was founded in 1906 but developed the serial acquisition business model in the 1980s by buying niche product businesses, allowing them to run autonomously, and using their cash flows to fund further acquisitions. Its 2001 spin-offs, Addtech and Lagercrantz, utilise the same model - as well as many other Swedish industrial acquirers, including Indutrade, Instalco, and Lifco.

The appeal of decentralisation, however, extends beyond industrials into the worlds of technology and banking. Vitec Software acquires niche, specialised software businesses, such as Ecclesia, which provides software as a service (SaaS) for the administration of Norwegian cemeteries and crematoria. Similarly, Handelsbanken, founded in 1871, continues to operate decentralised branches which only cover as far as one can see from the nearest church spire; an unusual banking model which recently received visitors from a South Korean peer eager to learn its nuances.

Even when Swedish decentralisation and serial acquisition has been successfully exported there seems to remain something to learn from its originators; the CEO of a successful Canadian software acquirer, Constellation Software, had been visiting many serial acquirers in Stockholm the week prior to our visit.

More tangible exports have built the success of Swedish industrial Atlas Copco, which derives more than 70% of its sales from outside Europe.3 From its pioneering work in the 1950s on the ‘Swedish method’ – a more ergonomic and efficient pneumatic mining drill – Atlas has built a formidable and broad portfolio: air compressors, vacuum pumps, and industrial tools.

Many of Atlas’s products were on display in their test mine, shared with former subsidiary Epiroc, 20 metres below the head office in Nacka. All new products must be more efficient or more ergonomic; examples of their innovations vary between all-electric air compressors to specially adapted grinding tools to reduce vibrational injuries amongst workers. Nor does product innovation preclude the possibility of new and exciting applications by customers, such as using oil-free air compressors to construct ‘bubble curtains’ around offshore wind developments, reducing noise by over 90% and protecting marine wildlife.4

In many respects, the range and depth of opportunities ahead of Atlas Copco belie its origins in Sweden’s 19th century railway system. This is testament to its employees’ capacity to think and act for the very long term; its CFO, Peter Kinnart, has spent 31 years there in nine different roles, backed by the enduring involvement of the Wallenberg family for the past 151 years.

Responsible stewardship has been a tailwind behind many Swedish companies, such as retailer Axfood, majority owned by the family-run Axel Johnson Group, and access systems provider Assa Abloy, over which the Douglas and Schörling families retain 40% of voting rights.3 Engaged and informed stewardship has allowed long-tenured management teams to operate autonomously and effectively within a high-trust environment, for the benefit of all stakeholders.

Admittedly, there is no one element of the above – long-term management teams and stewards, world-class products or interesting ideas – that one can describe as uniquely Swedish. But their lasting and dynamic combination within Sweden has been, and continues to be, a potent force in shaping our world.

Sarah Sheard

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