Serial Acquirers

Theme Update
Equity Research 27 February 2023
Serial acquirers
Optimism returned but the storm might not be over

Redeye provides its Q4 2022 sector update for Swedish serial acquirers. We discuss serial SERIAL ACQUIRERS VERSUS OMXSPI
acquirers in our coverage universe, select other serial acquirers, multiples paid over time, OMXSPI Redeye SA in dex
and capital allocation for serial acquirers. 12 0
10 0
Serial acquirer news flow in Q4 2022 80
Stock exchanges have recovered since we released our Q3 2022 update, though the 60
economic environment is uncertain as ever. Rising inflation and input material costs 40
have pressured margins in many cases, with some serial acquirers unable to pass on 20
cost increases fast enough to avoid (temporary) margin compression. 0

Feb-22 May-22 Aug-22 Nov-22 Feb-23
Note: 25 February 2022 = 100 for both indexes
Most serial acquirers still show solid sales growth and continued M&A deal flow. How
hard a likely imminent recession will hit many cyclically exposed serial acquirers ANALYSTS
remains uncertain. However, we believe that most quality acquirers have strong balance
Christian Binder
sheets that can weather any potential storms on the economic horizon.
[email protected]
Multiples paid over time Niklas Sävås
In this update, we have compiled estimated multiples paid by serial acquirers over time. niklas.savas @redeye.se
Note that we used disclosed sales at acquisition and/or pro-forma sales and profit in
the year of acquisition. Thus, the multiples we calculated may be distorted in some
cases, e.g., when one-time expenses lowered margins or if an acquisition of a cyclical
company occurs at the peak of a cycle. Therefore, we advise you to look at multiples
paid over time and consider them a rough approximation of valuation paid by the
respective serial acquirer.
Capital allocation
We examined both sources and uses of cash for serial acquirers in the Redeye SA index
in 2017-2022. Further, we examined M&A volume over the same period. Overall, these
companies’ collective deal volume peaked at 153 deals in 2021, up from 87 in 2017.
While 2022 saw a slight moderation in M&A volume (134), capital deployed on
acquisitions in 2022 was down only marginally from the previous year.
We judge that companies in the Redeye SA index have shown that their business models
are scalable. We believe that their acquisition-led growth journeys can continue in the
coming years, albeit at a slower pace in some cases. Still, many seem to hold onto their
wallets a little tighter than in more optimistic times, especially since H2 2022.
Serial acquirers theme event 2023
For the third consecutive year, Redeye is hosting the theme event Serial Acquirers on 08
March 2023 featuring 15 serial acquirers. This time we expand with international
perspectives in collaboration with InPractise, REQ Capital, and Chris Mayer. The event
goes wide and deep into the world of serial acquirers. We cover the big picture with
current valuations, go deep into individual companies, and discuss strategic decisions
in sharp panels. Read more about the event and the full programme here.
Important information: All information regarding limitation of liability and potential conflicts of interest can be found at the end of the report
Redeye, Mäster Samuelsgatan 42, 10tr, Box 7141, 103 87 Stockholm. Tel. +46 8-545 013 30, E-post: [email protected]
REDEYE Equity Research Serial Acquirers 27 February 2023
Table of contents
Optimism returned but the storm might not be over ................................ ...................... 1
Serial acquirer news flow in Q4 2022 ................................ ................................ .........3
Vitec: Solid growth in uncertain times ................................................................................... 3
Lagercrantz: Strong cash flow ............................................................................................... 6
Sdiptech: Still impacted by soft development in the largest unit .......................................... 9
Addnode: Strengthening its offering to public real estate companies ................................ 12
Comments on select other niche acquirers ................................ ............................... 13
Bergman & Beving: Margin expansion continues ................................................................ 13
Addlife: Mean reversion crashed the party .......................................................................... 16
Momentum Group – No slowdown in acquisition pace ..................................................... 18
Teqnion: Compounder in the making?................................................................................. 19
Volati: Bolt-ons and some notes on comparables .............................................................. 21
Lifco: The OG acquirer.......................................................................................................... 24
Röko: Fredrik Karlsson is back with a vengeance ............................................................... 26
Roll-ups ................................ ................................ ................................ ............ 29
Instalco: Paring a tougher economic environment relatively well ....................................... 29
Green Landscaping: Owner-operated with strong M&A growth potential .......................... 32
Capital allocation for serial acquirers ................................ ................................ ....... 36
Uses of cash: Acquisitions, CAPEX, dividends .................................................................... 36
Acquisitions: The bread and butter ...................................................................................... 37
CAPEX: Different strokes for different folks ........................................................................ 38
Dividends/share buybacks: The hot potato ......................................................................... 39

Sources of cash: OCF, share issues, debt ........................................................................... 41
Operating cash flow: The knife to the bread and butter ...................................................... 41
Share issues: A tale of opportunism and shareholder base................................................ 42
Debt: Prudent leverage can amplify ROE ............................................................................. 43
ROIC: Higher than WACC please.......................................................................................... 44
Redeye M&A classification framework ................................ ................................ ..... 45
M&A lessons from hell ................................ ................................ ......................... 50
Redeye equity research team................................ ................................ ................. 53
Disclaimer................................ ................................ ................................ ......... 54
2
Serial acquirer news flow in Q4 2022

Below we present some of the deals and news we found most notable during the fourth quarter
of 2022. We begin with Vitec Software Group, Lagercrantz, Sdiptech, and Addnode, which
Redeye covers, followed by a few other serial acquirers that we consider particularly interesting.
Vitec: Solid growth in uncertain times
Vitec made one acquisition in Q4 (Raisoft Oy), though the highlight of the company’s fourth
quarter revolved around solid sales growth and stable margins in uncertain times. In Q1-Q4
2022, Vitec acquired annual sales of cSEK433m, representing c20% of the company’s pro -
forma LTM sales (SEK2,208m). During the fourth quarter, Vitec completed a directed share
issue yielding gross proceeds of cSEK834m, providing plenty of M&A firepower for 2023e.
Vitec’s Q4 2022 net sales amounted to cSEK578.1m (c421.4m in Q4 2021), representing sales
growth of c37% (c16%) in Q4 2022. We judge that inflation indexing of customer contracts and
a weak SEK contributed to strong sales growth during Q4 and 2022. The company posted solid
recurring revenue growth of c29% (c13%) in the fourth quarter, of which c13% was organic
growth.
Despite unusually high acquisition-related expenses in H2 2022, Vitec protected its margins.
Specifically, EBITDA, EBITA, and EBIT margins equalled c36% (c36%), c27% (c27%), and c18%
(c17%) in Q4 2022. We expect margins to increase slightly in 2023e.
Further, we appreciate Vitec’s inherent robustness with mission-critical software products and
inflation-indexed customer contracts. While storm clouds may be brewing on the economic
horizon in 2023e, we expect a negligible effect on Vitec’s subsidiaries. Notably, we believe that
less M&A competition from VMS acquirers that have overextended themselves in the glory days
of 2020-2021 may provide an opportunity for the company.
Read more about Vitec’s Q4 2022 report in our latest research update.
Vitec: Acquisitions in 2022

Growth contribution
Company Consolidated Sales* (SEKm)
(%, versus LTM)**
DocuBizz ApS 2022-01-21 32 1.4%
Hotellinx Systems Oy 2022-05-04 21 1.0%
Scanrate Financial Systems AS 2022-09-07 57 2.6%
ABS Laundry Business Solutions 2022-07-06 257 11.6%
Oy Raisoft Ltd 2022-10-05 66 3.0%
Total 433 19.6%
*Disclosed 2022 sales **Disclosed 2022 sales as a percentage of pro-forma LTM sales for the group
(SEK2,208m at the end of Q4 2022)
Source: Vitec (actuals), Redeye Research (estimates)
Vitec: Large acquisition in the Netherlands
It turns out that Vitec had several bullets in its elephant gun. Following last year’s large
acquisition of ABS (2022 sales cSEK257m), Vitec acquired Dutch software company Enova on
23 February 2023 (2021–2022 average annual sales cEUR28m (cSEK310m)). Enova has 250+
clients in the Netherlands, the UK, and France. This is a rather large deal for Vitec, considering
average sales per acquiree of cSEK45m–49m in 2019-2022. Its annual sales correspond to
c14% of Vitec’s pro forma LTM sales of cSEK2,208m at the end of Q4 2022. While we expect
the average deal size to remain at sales per acquiree of cSEK50m long-term, Vitec has acted
opportunistically. We note that large M&A deals tend to come at higher valuations and, thus,
lower returns.
3
Vitec: The long-term view
Vitec’s history as a VMS serial acquirer goes back to 1998. Over the years, the company has
ramped up acquisitions to five per annum recently. In 2022, the company’s organic growth
increased to c11% from low- to mid-single-digits historically, likely related to inflation-indexing
of its recurring revenue and currency tailwinds. The company has increased acquired pro forma
sales from cSEK89m in 2010 to cSEK433m in 2022. Similarly, acquired pro forma EBT has
increased from cSEK10m in 2010 to cSEK154m in 2022. The multiples that Vitec has paid for
acquisitions over time seem to have crept upwards. Specifically, according to our calculations,
the average total consideration/EBT amounted to c9.0x in 2010-2022, c9.7x in 2017-2022, and
c11.6x in 2019-2022. Net cash deployed on acquisitions has increased from cSEK5m-46m per
year in 2010-2013 to cSEK1.1bn-1.3bn per year in 2021-2022. Overall, we judge that c1,000-
2,000 relevant VMS companies exist in Vitec’s current markets (the Nordics and the
Netherlands), i.e., the company can keep executing its acquisition agenda for the foreseeable
future without entering new markets.
Vitec: Historical key financials and M&A

SEKm 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Net sales 313 360 389 372 492 618 675 855 1,017 1,156 1,313 1,571 1,978
Recurring revenues 174 211 231 262 373 481 519 610 744 908 1,080 1,324 1,631
Net sales growth (%) 116.9% 14.7% 8.2% -4.5% 32.4% 25.7% 9.2% 26.6% 18.9% 13.7% 13.5% 19.7% 25.9%
Recurring revenues growth (%) 23.9% 21.4% 9.3% 13.7% 42.1% 28.9% 7.9% 17.6% 21.9% 22.0% 19.1% 22.6% 23.2%
Organic growth net sales (%) 11.0% -2.0% 1.0% nd 2.0% 2.0% -5.0% 1.3% nd nd -1.9% 4.4% 11.0%
Org. growth recurring revs (%) nd nd nd nd nd nd nd nd 6.0% 5.6% 4.2% 7.1% 11.0%
EBITA* 30 47 56 54 92 131 133 171 212 247 345 440 582
EBITA margin (%) 9.5% 13.1% 14.5% 14.5% 18.8% 21.2% 19.7% 20.0% 20.8% 21.4% 26.3% 28.0% 29.4%
Number of acquisitions 1 1 1 1 2 4 3 1 4 5 5 5 5
Previous year sales** 73 13 50 47 145 109 102 145 108 158 161 219 355
Previous sales/acq 73 13 50 47 73 27 34 145 27 32 32 44 71
Acquired sales*** 89 16 60 55 120 107 114 178 122 157 163 224 433
Acquired EBT*** 10 4 11 5 11 10 17 16 23 22 31 88 154
EBT margin (%) 10.9% 24.8% 18.2% 9.4% 9.1% 9.5% 14.9% 9.1% 18.6% 13.9% 19.0% 39.5% 35.6%
Acquired sales/acq 89 16 60 55 60 27 38 178 31 31 33 45 87
Acquired EBT/acq 10 4 11 5 5 3 6 16 6 4 6 18 31
Net cash deployed on acq 39 5 46 17 149 86 152 89 134 219 167 1,260 1,144
CCs for previous acq 0 0 8 17 0 5 15 2 24 11 6 70 86
Purchase consideration**** 39 8 39 48 101 81 141 107 110 240 184 1,215 1,205
Contingent consideration 0 8 18 45 0 10 24 0 11 48 74 44 417
Total consideration 39 16 57 93 101 90 165 107 121 288 257 1,259 1,621
Contingent/total (%) 0% 50% 32% 49% 0% 11% 14% 0% 9% 17% 29% 3% 26%
Net acq/previous sales (x) 0.5 0.4 0.9 0.4 1.0 0.8 1.5 0.6 1.2 1.4 1.0 5.8 3.2
EV/Sales initial***** (x) 0.4 0.5 0.6 0.9 0.8 0.8 1.2 0.6 0.9 1.5 1.1 5.4 2.8
EV/EBT initial***** (x) 4.0 2.0 3.5 9.2 9.3 7.9 8.3 6.6 4.8 11.0 5.9 13.8 7.8
EV/Sales total***** (x) 0.4 1.0 1.0 1.7 0.8 0.8 1.4 0.6 1.0 1.8 1.6 5.6 3.7
EV/EBT total***** (x) 4.0 4.0 5.2 18.0 9.3 8.9 9.6 6.6 5.3 13.2 8.3 14.3 10.5
Note: *estimates for 2010-2012 as Vitec has not disclosed EBITA for these years; remaining years as reported by Vitec without adjustments, **reporte d
local currency figures converted to SEK using average exchange rate in acquisition year, ***full-year pro forma figures disclosed for acquired companies
in the year of acquisition; 2010-2015 net sales and EBT figures include estimates due to insufficient disclosure , ****net of acquired cash; partial payments
with convertibles included in initial purchase consideration, *****based on full-year figures in year of acquisition
Source: Vitec company filings (financial figures), Redeye Research (table structuring)
4
Vitec: Historical M&A

Vitec: Number of acquisitions and acquired pro forma sales and EBT (SEKm) per year
500 6
Acquired sales (previous year)

450
Acquired sales (acquisition year)
5
Acquired EBT (acquisition year)
400
Number of acquisitions (rhs)
350
4
300
250 3
200
2
150
100
1
50
0 0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Vitec: Purchase considerations (SEKm) and paid EV/EBT multiples (x) over time
2009.5 2010.5 2011.5 2012.5 2013.5 2014.5 2015.5 2016.5 2017.5 2018.5 2019.5 2020.5 2021.5 2022.5
1,800 20
Purchase consideration (SEKm)
Contingent consideration (SEKm)
1,600 18
EV/EBT initial (x)
EV/EBT total (x) 16
1,400
14
1,200
12
1,000
10
800
8
600
6
400
4
200 2
0 0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Source: Vitec company filings (financial figures), Redeye Research (chart structuring)
5
Lagercrantz: Strong cash flow
Lagercrantz made two acquisitions in its fiscal third quarter ending 31 December 2022 (split
fiscal year). On an LTM basis, Lagercrantz has added cSEK1.2bn of pro forma sales from
acquisitions, corresponding to a c20% sales growth contribution. As we commented in the last
quarter and reaffirmed this quarter, Lagercrantz continues to see lower valuation multiples in
private markets. With all types of price discovery, it is about supply and demand, and we believe
the main reasons for lower valuations emanate from both sides. Specifically, buyers are more
hesitant than before, considering a more uncertain economic environment. Further, sellers’
valuation expectations still skew relatively high from more ebullient times in 2020-2021.
Naturally, it takes some time to reset expectations, enabling buyers and sellers to meet.
During Q4 2022, Lagercrantz boosted its financial position with an opportunistic sale of treasury
shares (cSEK150m in proceeds). Further, the company generated strong operational cash flow
in the quarter. It also bought two companies: Tykoflex, based in Sweden, with annual sales of
cSEK140m and EBITA of cSEK23m, and Agentuuri Neumann in Finland, with sales of cSEK11m
and EBITA margins that we believe amount to c15%. The Tykoflex transaction included
payments in both cash and shares. Some 80% of the new shares are subject to a lock-up, with
customary exceptions. Specifically, 30% of the new shares are subject to lock-up for six months,
while 50% are subject to lock-up for 12 months. We assume the paid valuation multiple to be
around 6x Tykoflex’s disclosed EBITA of cSEK22m-24m, equalling cSEK135m.
Lagercrantz: Acquisitions in 2022

Growth contribution
Company Segment Consolidated Sales* (SEKm)
(%, versus LTM)**
Tykoflex Electrify 2022-12-01 140 1.4%
Agentuuri Neumann Electrify 2022-12-01 11 0.1%
Waterproof Diving International Niche Products 2022-09-01 90 1.0%
Tebul Oy International 2022-09-01 55 0.6%
Door and Joinery TecSec 2022-07-01 54 0.6%
Stegborgs El-evator Control 2022-07-01 60 1.0%
PcP TecSec 2022-06-01 596 10.3%
ARAS Security TecSec 2022-01-01 56 1.1%
Westmatic Niche Products 2022-01-01 175 3.5%
Total 1,237 19.6%
*Based on most recent disclosed 12-month sales figure **Most recent disclosed 12-month sales as a percentage of
Lagercrantz’s LTM sales in the quarter when an acquisition occurred
Source: Lagercrantz (actuals), Redeye Research (estimates)
Lagercrantz had another solid quarter operationally, with 10% organic growth y/y. The company
mentioned that demand continues to be strong across the board, with most units performing
according to plan. Of its 62 business units, 49 posted EBIT margins above 10%, and only three
units sported EBIT margins below 3%. Management recently noted that it is prepared for a
potentially challenging economic climate and has contingency plans for its business units,
focused on keeping costs down and preserving cash flows. Lagercrantz implemented these
plans in the underperforming units in Q3 2022/2023. The key factor that stood out in the Q3
report was the strong cash flow generation. While Lagercrantz’s fiscal Q3 tends to feature
seasonally strong cash flow, the company also managed to trim some excess inventory it had
built up in recent quarters. We expect further inventory reductions in coming quarters.
Lagercrantz’s strong financial position and execution capabilities make us confident that the
company can continue to perform in a potentially weaker economic climate.
Read more about our takes on Lagercrantz’s Q3 report in our latest research update.
6
Lagercrantz: The long-term view
Bergman & Beving spun off Lagercrantz in 2001. The company has grown net sales from
cSEK1,463 in its fiscal 2002/2003 to cSEK5,482m in 2021/2022, representing a CAGR of c7.2%.
More impressively, Lagercrantz’s EBITA margin increased from an estimated c1.9% to c16.3%
over the same period. Therefore, EBITA increased from cSEK28m in 2002/2003 to cSEK895m
in 2021/2022 (CAGR c20.1%). The company made c5-6 acquisitions per year in 2016/2017-
2021-2022 (mean 5.5, median 6.0). Average acquired sales and EBIT per acquiree amounted to
cSEK50m-60m (mean cSEK60.6m, median cSEK52.7m) and cSEK9m (mean cSEK9.2m,
median cSEK9.1m) during that period, respectively. We judge that the company’s current size
is still relatively modest, i.e., Lagercrantz should be able to continue its serial acquirer journey
for the foreseeable future.
Lagercrantz: Historical key financials and M&A

SEKm 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 Q1-Q3
Net sales 1,983 1,463 1,568 1,518 1,608 1,974 2,172 2,138 1,720 2,029 2,265 2,328 2,546 2,846 3,057 3,096 3,410 3,932 4,180 4,091 5,482 5,206
Net sales growth (%) -24.1% -26.2% 7.2% -3.2% 5.9% 22.8% 10.0% -1.6% -19.6% 18.0% 11.6% 2.8% 9.4% 11.8% 7.4% 1.3% 10.1% 15.3% 6.3% -2.1% 34.0% 33.2%
Organic growth (%) nd nd nd nd 5% 4% 4% nd nd 13% 7% -3% 3% 5% 1% -2% -2% 7% 0% -4% 16% 10%
Acquired growth (%) nd nd nd nd nd 19% 6% 2% nd 12% 6% 8% 6% 4% 7% 3% 11% 6% 5% 3% 18% 19%
FX effects/other (%) nd nd nd nd nd nd nd nd nd -7% -2% -3% 0% 3% 0% 1% 1% 3% 1% -2% 0% 4%
EBITA* 81 28 31 9 58 103 136 111 74 154 194 223 256 294 355 409 436 519 565 616 895 863
EBITA margin (%) 4.1% 1.9% 2.0% 0.6% 3.6% 5.2% 6.3% 5.2% 4.3% 7.6% 8.5% 9.6% 10.1% 10.3% 11.6% 13.2% 12.8% 13.2% 13.5% 15.1% 16.3% 16.6%
Number of acquisitions** 0 1 1 1 1 3 1 2 0 5 2 4 3 5 3 6 6 1 6 7 7 7
Assessed annual sales*** na 130 35 48 75 333 46 77 na 281 78 245 148 160 370 226 409 70 319 320 654 1,006
Assessed annual sales/acq na 130 35 48 75 111 46 38 na 56 39 61 49 32 123 38 68 70 53 46 93 144
Acquired sales**** na nd nd nd 71 365 55 72 na 302 78 246 133 164 377 233 435 66 228 276 761 1,056
Acquired EBIT**** na nd nd nd nd 33 7 4 na 43 11 35 19 32 74 29 63 13 46 29 107 171
EBIT margin (%) na na na na na 9.0% 12.7% 5.6% na 14.2% 14.1% 14.2% 14.3% 19.5% 19.6% 12.4% 14.5% 19.7% 20.2% 10.5% 14.1% 16.2%
Acquired sales/acq na na na na 71 122 55 36 na 60 39 62 44 33 126 39 73 66 38 39 109 151
Acquired EBIT/acq na na na na na 11 7 2 na 9 6 9 6 6 25 5 11 13 8 4 15 24
Net cash deployed on acq 0 9 33 -1 28 160 27 57 2 278 48 199 130 128 288 208 519 142 260 325 653 802
CCs for previous acq nd nd 2 nd nd nd nd nd nd nd nd 4 2 20 7 52 34 19 40 45 29 nd
Purchase consideration***** na 11 33 7 27 177 19 56 na 277 45 195 128 115 279 167 435 135 267 261 724 nd
Contingent consideration****** na 2 8 nd nd nd nd nd na 23 17 85 52 55 125 80 104 0 44 71 73 nd
Total consideration na 13 41 na na na na na na 300 62 280 180 170 404 247 539 135 311 332 797 na
Contingent/total (%) na 15% 20% na na na na na na 8% 27% 30% 29% 32% 31% 32% 19% 0% 14% 21% 9% na
Net acq/previous sales (x) na 0.1 0.9 neg 0.4 0.5 0.6 0.7 na 1.0 0.6 0.8 0.9 0.8 0.8 0.9 1.3 2.0 0.8 1.0 1.0 0.8
EV/Sales initial******* (x) na na na na 0.4 0.5 0.3 0.8 na 0.9 0.6 0.8 1.0 0.7 0.7 0.7 1.0 2.0 1.2 0.9 1.0 na
EV/EBIT initial******* (x) na na na na na 5.4 2.7 14.0 na 6.4 4.1 5.6 6.7 3.6 3.8 5.8 6.9 10.4 5.8 9.0 6.8 na
EV/Sales total******* (x) na na na na na na na na na 1.0 0.8 1.1 1.4 1.0 1.1 1.1 1.2 2.0 1.4 1.2 1.0 na
EV/EBIT total******* (x) na na na na na na na na na 7.0 5.6 8.0 9.5 5.3 5.5 8.5 8.6 10.4 6.8 11.4 7.4 na
Note: *estimated EBITA in 2011/2012 and prior, **disclosed major acquisitions, ***reported local currency figures converted to SEK using average exchange rate in year
of acquisition, ****full-year pro forma figures disclosed for acquired companies in the year of acquisition, *****net of acquired cash, ******maximum estimated contingent
consideration, *******based on full-year figures in year of acquisition
Source: Lagercrantz company filings (financial figures), Redeye Research (table structuring)
7
Lagercrantz: Historical M&A

Lagercrantz: Number of acquisitions and acquired pro forma sales and EBITA (SEKm) per year
1,250 10
Acquired EBIT (acquisition year)
1,000 8
750 6
500 4
250 2
0 0
06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 Q1-Q3
Lagercrantz: Purchase considerations (SEKm) and paid EV/EBITA multiples (x) over time
900 18
800 16
EV/EBIT initial (x)
EV/EBIT total (x)
700 14
600 12
500 10
400 8
300 6
200 4
100 2
0 0
06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22
Source: Lagercrantz company filings (financial figures), Redeye Research (chart structuring)
8
Sdiptech: Still impacted by soft development in the largest unit
Sdiptech acquired sales of cSEK804m and EBITA of cSEK161m (above its target of 120–150
MSEK) during 2022 (listed below). Sdiptech continues to buy high-margin companies at a rapid
pace and made three acquisitions during Q4 2022: IMP, Patol and Linesense Fire Detection, and
Mecno Service. We have estimated the figures for IMP, given no disclosure by the company.
The initial EV/EBITA multiple for Patol was c9.2x, which could grow to c11.4x depending on the
result for the next two years. The initial EV/EBITA multiple for Mecno Service was c7.5x, with
an add-on that could be paid in 2027e, taking the total to a potential c10x. Sdiptech typically
structures earn-outs over five years, but Patol was a special case considering an imminent
generational leadership change (the previous owner-operator is over 80 years old).
Sdiptech: Acquisitions in 2022

Growth contribution
(%, versus LTM)**
Mecno Service SIS 2022-11-01 143 4.4%
Patol SIS 2022-11-01 40 1.2%
IMP SIS 2022-10-01 20 0.6%
ELM SIS 2022-06-01 275 9.7%
RDM SIS 2022-05-01 173 6.1%
TEL SIS 2022-03-01 65 2.4%
Agrosistemi RE 2022-02-01 89 3.3%
Total 804 27.6%
*Based on most recent disclosed 12-month sales figure **Most recent disclosed 12-month sales as a
percentage of Sdiptech’s LTM sales in the quarter when an acquisition occurred
Source: Sdiptech (actuals), Redeye Research (estimates)
Organic sales growth in the fourth quarter amounted to c2.1% on a constant-currency basis.
As we mentioned in our last quarterly update, Sdiptech was impacted by negative development
within its largest business unit Rolec, which we expected to continue into Q4 2022. Besides
Rolec, Sdiptech’s other business units continued to perform well. On a positive note,
management signalled that it expects Rolec to return to healthy growth and profitability in
2023e. Overall, 2022 has been a mixed bag for Sdiptech, where strong growth from acquisitions
has been overshadowed by soft organic development, mainly due to Rolec’s struggles.
Sdiptech: Organic versus acquired growth

60%
Organic growth Acquired growth
50%
40%
30%
40.0% 38.5%
21.2%
20% 39%
10%
11.3%
8.0% 8.1%
0%
-10%
-10%
-20%
2019 2020 2021 2022
Source: Sdiptech company filings (financial figures), Redeye Research (table structuring)
9
If the company continues to execute its strategy and organic sales/EBITA growth rebounds in
2023e, which we consider a likely scenario, we believe the discount to peers will shrink. This
scenario creates a potential twin-engine of growth and multiple expansion for the stock.
Read more about our takes on Sdiptech’s Q4 report in our latest research update.
Sdiptech: The long-term view
Sdiptech has grown net sales from cSEK412m in 2015 to cSEK3,505m in 2022, representing a
CAGR of c35.8%. EBITA increased at a CAGR of c53.3% during the same period, i.e., from
cSEK34m to cSEK671m. Thus, EBITA margin expanded from c8.2% in 2015 to c19.1% in 2022.
According to our calculations, the company has paid an initial EV/EBITA multiple of c5x (mean
c5.2x, median c4.8x) for acquisitions in 2015-2022. Including the maximum possible contingent
consideration, paid EV/EBITA increased to c9x (mean 8.8x, median 9.0x). Notably, initial and
maximum EV/EBITA paid seem to have increased in recent years, amounting to c7x and c11x
in 2021-2022. Notably, Sdiptech has used share issues to fuel its rapid growth in recent years.
Shares outstanding have increased from c20.3m common shares and 0 preference shares at
year-end 2014 to c37.8m common shares and c1.8m preference shares at the end of 2022.
Sdiptech: Historical key financials and M&A

SEKm 2015 2016 2017 2018 2019 2020 2021 2022
Net sales 412 776 1,078 1,496 1,825 2,088 2,719 3,505
Net sales growth (%) 204.4% 88.0% 39.0% 38.8% 22.0% 14.4% 30.2% 28.9%
Organic growth net sales (%) 0.3% 5.0% 6.3% 5.4% 0.4% 3.5% 10.7% -0.4%
EBITA 34 111 123 177 262 347 509 671
EBITA margin (%) 8.2% 14.3% 11.4% 11.8% 14.4% 16.6% 18.7% 19.1%
Organic growth EBITA (%) -231.0% 39.0% nd nd 9.0% 11.3% 8.1% -10.1%
Number of acquisitions 5 7 5 8 4 4 4 7
Estimated acquired sales 288 382 200 412 355 472 570 816
Estimated acquired EBITA* 44 81 35 81 92 89 159 161
EBITA margin (%) 15.4% 21.1% 17.5% 19.6% 25.9% 18.8% 27.8% 19.7%
Acquired sales/acq 58 55 40 51 89 118 143 117
Acquired EBITA/acq 9 12 7 10 23 22 40 23
Net cash deployed on acq 161 319 161 293 544 599 1,033 1,485
CCs for previous acq nd nd 0 6 73 79 109 356
Purchase consideration** 160 354 154 285 469 520 1,160 1,126
Contingent consideration*** 79 290 231 260 374 270 515 646
Total consideration 239 644 385 545 843 790 1,675 1,772
Contingent/total (%) 33% 45% 60% 48% 44% 34% 31% 36%
EV/Sales initial**** (x) 0.6 0.9 0.8 0.7 1.3 1.1 2.0 1.4
EV/EBITA initial**** (x) 3.6 4.4 4.4 3.5 5.1 5.9 7.3 7.0
EV/Sales total**** (x) 0.8 1.7 1.9 1.3 2.4 1.7 2.9 2.2
EV/EBITA total**** (x) 5.4 8.0 11.0 6.8 9.2 8.9 10.6 11.0
Note: *as disclosed in company filings, EBT in 2020-2022 due to changed disclosure, **net of acquired cash,
***maximum possible contingent consideration, estimate in years where maximum possible contingent
consideration was not disclosed, ****based on full-year figures in year of acquisition as disclosed or estimated
by Redeye Research
Source: Sdiptech company filings (financial figures), Redeye Research (table structuring)
10
Sdiptech: Historical M&A

Sdiptech: Number of acquisitions and estimated acquired sales and EBITA (SEKm) per year
900 9
Estimated acquired sales
800 Estimated acquired EBITA 8

700 7
600 6
500 5
400 4
300 3
200 2
100 1
0 0
2015 2016 2017 2018 2019 2020 2021 2022
Sdiptech: Purchase considerations (SEKm) and paid EV/EBITA multiples (x) over time
2014.5 2015.5 2016.5 2017.5 2018.5 2019.5 2020.5 2021.5 2022.5
2,000 12
1,800
EV/EBITA initial (x)
EV/EBITA total (x) 10
1,600
1,400
8
1,200
1,000 6
800
4
600
400
2
200
0 0
2015 2016 2017 2018 2019 2020 2021 2022
Source: Sdiptech company filings (financial figures), Redeye Research (chart structuring)
11
Addnode: Strengthening its offering to public real estate companies
Addnode sported a high M&A activity during the last 12 months, mainly due to acquiring the
large US-based Autodesk-VAR Microdesk. So far, the acquisition has been a success,
combining strong growth with solid profitability. However, one would expect some volatility as
it partly sells three-year licenses recognised up-front. Nevertheless, it fits Addnode’s track
record of large acquisitions performing well (Transcat, Excitech).
After the end of Q4 2022, Addnode acquired FAST2, a supplier of ERP software for real estate
companies. The software sports nine out of 13 of Sweden’s largest public housing companies
as customers and will add cSEK80m in annual sales. By acquiring FAST2, the proprietary
offerings in Design Management (SWG, Tribia, and now FAST2) generate cSEK500m in yearly
sales. While SWG and Tribia have margins above the Design Management average,
management states that FAST2 currently operates at lower levels but with solid future margin
expansion prospects.
Assuming an acquisition multiple in line with what Addnode typically pays for a proprietary
software companies (c7-9x EBITA), we view the acquisition positively. Specifically, we judge it
strengthens Addnode’s proprietary offering towards real estate owners.
Addnode: Acquisitions in 2022

Growth contribution
(%, versus LTM)**
FAST2 DM 2023-01-01 80 4.7%
JBL PLM 2022-10-01 15 0.8%
Descisive AS PM 2022-06-03 57 3.8%
Microdesk DM 2022-03-01 1,062 26.0%
DESYS PLM 2022-03-01 170 4.2%
Total 1,384 39.6%
*Based on most recent disclosed 12-month sales figure **Most recent disclosed 12-month sales as a
percentage of Addnode’s LTM sales in the quarter when an acquisition occurred
Source: Addnode (actuals), Redeye Research (estimates)
Addnode’s Q4 2022 beat our sales forecast by c14%, thanks to stronger-than-expected organic
and acquired growth. While all divisions exceeded our sales expectations, the c22% organic
growth in Design Management was the main reason behind the deviation. EBITA and EPS
matched our expectations, as the strong Design Management performance compensated for
lower-than-expected margins in PLM and Process Management.
Despite fears of a weakening German market in the Q3 2022 report, every market had a stable
performance during the fourth quarter. While management does not expect perfect market
conditions in 2023e, it believes they will be solid enough to support Addnode’s growth
ambitions.
Read more about our take on Addnode’s Q4 report in our latest research update.
12
Comments on select other niche acquirers

We follow all quality serial acquirers in the Nordics closely and cover the latest events for some
of them below.
Bergman & Beving: Margin expansion continues
For those interested in learning more about Bergman & Beving, we delved deeper into its
heritage, skin-in-the-game, how it returned to its roots, and its ramp-up of acquisitions in our Q3
2022 update.
In its fiscal Q3 2022/2023, ending 31 December 2022, Bergman & Beving made no acquisitions.
CEO Magnus Söderlind mentioned in an interview after the report that the company turned
slightly more defensive towards the end of 2022. The main reason seems to be a potentially
weaker economic climate in 2023e. Bergman & Beving believes that storm clouds on the
economic horizon have cleared somewhat, and the company subsequently made an
acquisition in the UK in early February 2023 (ATE Solutions). ATE sports cSEK31m (cGBP2.5m)
in annual sales and EBIT margins that we believe are above 15% (Mr Söderlind remarked in an
interview that ATE is the group’s most profitable company). At the end of February, Bergman &
Beving acquired the Finnish company Kiilax, sporting cSEK100m (cEUR9m) in sales and EBIT
margins that we believe are c15%. Bergman & Beving expects to make four to six acquisitions
during the calendar year of 2023.
We judge that Bergman & Beving reported a solid fiscal Q3 2022/2023 with c-3% organic sales
growth and c7% total sales growth (currency contributed c4%). As mentioned in our last update,
one of its logistics suppliers, Speed Group, suffered an IT security breach, which impacted
Bergman & Beving’s Q2 numbers. These adverse effects partly reversed in the third quarter,
where EBITA margins increased from c7.2% to c8.3% y/y. Most of the company’s 21 business
units improved their results in the quarter. The negative organic growth is according to plan as
the company continues to phase out large volume and low margin products within its
distribution business.
Bergman & Beving: Net sales and EBITA development Q1 2020/2021-Q3 2022/2023
1,500 12%
Net sales EBITA EBITA margin (%, rhs)
1,250 10%
1,000 8%
750 6%
500 4%
250 2%
0 0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2020/2021 2021/2022 2022/2023
Source: Bergman & Beving (actuals), Redeye Research (chart structuring)
We believe investors should track the company’s ability to deliver continuous margin expansion
with flat organic top-line growth in the coming quarters. The company trades at a significant
discount to its peers, which we believe derives from its lower return on capital compared to
peers (ROE is c10% vs peers at ≥20%). Further, we judge that the current market narrative shuns
companies featuring cyclical industry exposure, especially construction (B&B has c60%
revenue exposure to industry and c40% to construction). If Bergman & Beving delivers on its
13
plan to achieve an EBIT of cSEK500m within two to three years (LTM EBIT cSEK315m), we
believe it will report return metrics in line with its peers in a few years, likely leading to a rerating
of its stock. We judge that the combination of margin and multiple expansion makes Bergman
& Beving a compelling stock at current levels.
Bergman & Beving: The long-term view
Bergman & Beving has grown net sales from cSEK3.8bn in its 2016/2017 fiscal year to
cSEK4.6bn in 2021/2022, representing a CAGR of c3.6% (organic growth c-0.8%, acquired
growth c4.3%). EBITA grew from cSEK260m to cSEK331m over the same period (CAGR c4.9%).
The company has paid EV/Sales multiples of c0.9-1.0x for acquisitions (no profit figures
disclosed). Bergman & Beving has increased its acquisition volume from one deal in 2016/2017
to five per year in 2021/2022. We understand that the company currently focuses on improving
existing subsidiaries’ profitability. As Bergman & Beving improves its profitability to more
satisfactory levels (LTM EBITA/average working capital target of ≥45% versus c22% in
2021/2022), we expect M&A volume to increase. Considering the current focus on increasing
profitability and a likely imminent recession, we expect organic sales growth to stay relatively
weak in the coming year or two. Still, we judge that M&A could contribute to the company
reaching its profitability target by acquiring companies with higher EBITA/working capital than
Bergman & Beving currently has.
Bergman & Beving: Historical key financials and M&A

SEKm 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 22/23 Q1-Q3
Net sales 3,650 3,834 3,833 3,945 4,060 4,311 4,575 3,512
Net sales growth (%) nd 5.1% 0.0% 2.9% 2.9% 6.2% 6.1% 4.2%
Organic growth (%) 2% 3% -8% -2% -3% 5% 0% -4%
Acquired growth (%) nd 2% 8% 2% 6% 4% 5% 5%
FX/other growth (%) nd 1% 0% 3% 0% -3% 1% 3%
EBITA nd 260 224 249 208 271 331 278
EBITA margin (%) na 6.8% 5.8% 6.3% 5.1% 6.3% 7.2% 7.9%
SEKm 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 Q3 22/23 LTM
Assessed annual sales* na 74 225 87 274 94 115 226
Assessed annual sales/acq na 74 113 29 55 19 23 57
Net cash deployed on acq na 92 191 68 207 107 137 184

CCs for previous acq na 0 2 0 0 32 6 2
Purchase consideration** na 92 207 68 207 80 131 182
Contingent consideration na 6 0 3 44 5 9 56
Total consideration na 98 207 71 251 85 140 238
Contingent/total (%) na 6% 0% 4% 18% 6% 6% 24%
Net acq/assessed sales (x) na 1.2 0.8 0.8 0.8 1.1 1.2 0.8
EV/Sales initial (x) na 1.2 0.9 0.8 0.8 0.9 1.1 0.8
EV/Sales total (x) na 1.3 0.9 0.8 0.9 0.9 1.2 1.1
Note: *reported local currency figures converted to SEK at average exchange rate in year of acquisition, **net
of acquired cash
Source: Bergman & Beving company filings (financial figures), Redeye Research (table structuring)
14
Bergman & Beving: Historical M&A

Bergman & Beving: Number of acquisitions and acquired assessed annual sales (SEKm) per year
300 6
Assessed annual sales
250 5
200 4
150 3
100 2
50 1
0 0
2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 Q3 22/23 LTM
Bergman & Beving: Purchase considerations (SEKm) and paid EV/Sales multiples (x) over time
300 1.4
1.2
250
EV/Sales initial (x) 1.0
200
EV/Sales total (x)
0.8
150
0.6
100
0.4
50
0.2
0 0.0
2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 Q3 22/23 LTM
Source: Bergman & Beving company filings (financial figures), Redeye Research (chart structuring)
Notably, we will closely track how the company’s sales growth and profitability will develop in
the anticipated recession of 2023e. Bergman and Beving experienced a considerable decline in
sales and profit during the Great Financial Crisis (GFC). Specifically, net sales declined from
cSEK9.1bn in 2007/2008 to cSEK7.6bn in 2009/2010. Similarly, EBIT declined from cSEK674m
to cSEK261m over the same period. This was before the spin-off of Alligo/Momentum Group,
i.e., only about one-third of the company’s sales then constituted products. Further, the largest
detractor of Bergman & Beving’s financial performance during the GFC seemed to be the now
spun-off TOOLS division.
Bergman & Beving’s M&A volume declined from 38 acquisitions in 2006/2007 and 28 in
2007/2008 to 0 in 2009/2010. The company’s M&A volume started growing again in
2015/2016-2016-2017. We judge that Bergman & Beving's current businesses are more
recession-resistant than the company was in the GFC, with c69% of LTM net sales coming from
private label own brands. Further, we believe a potential recession in 2023e will not be as severe
as the GFC. Still, how a recession will affect the company’s profit and M&A volume remains to
be seen.
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Bergman & Beving: Historical key financials and M&A

Number of acquisitions 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22
New acquisitions 5 5 2 18 9 38 28 9 0 0 1 0 0 1 2 5 2 3 5 5 5
Increases in partly owned subs 6 3 3 5 0 1
Assessed annual sales (SEKm) 155 130 552 800 770 1570 1420 295 na na 25 na na nd 22 454 225 87 274 94 115
Annual sales/acquiree (SEKm) 31 26 276 44 86 41 51 33 na na 25 na na na 11 91 113 29 55 19 23
Key financials (SEKm) 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22
Net sales 3,956 3,975 3,881 3,863 5,058 6,823 9,133 9,325 7,648 7,885 8,201 7,666 7,648 7,903 7,821 8,272 3,833 3,945 4,060 4,311 4,575
Gross profit 1,126 1,212 1,194 1,193 1,611 2,468 3,380 3,581 2,954 3,171 3,317 3,045 3,103 3,243 3,223 3,397 1,637 1,665 1,672 1,738 1,950
Gross margin (%) 28.5% 30.5% 30.8% 30.9% 31.9% 36.2% 37.0% 38.4% 38.6% 40.2% 40.4% 39.7% 40.6% 41.0% 41.2% 41.1% 42.7% 42.2% 41.2% 40.3% 42.6%
EBIT 146 154 129 198 306 443 674 511 261 347 409 289 340 450 486 323 216 236 189 247 298
EBIT margin (%) 3.7% 3.9% 3.3% 5.1% 6.0% 6.5% 7.4% 5.5% 3.4% 4.4% 5.0% 3.8% 4.4% 5.7% 6.2% 3.9% 5.6% 6.0% 4.7% 5.7% 6.5%
Net income 91 95 79 136 210 290 432 291 134 194 227 222 214 306 362 237 158 169 116 166 202
Net margin (%) 2.3% 2.4% 2.0% 3.5% 4.2% 4.3% 4.7% 3.1% 1.8% 2.5% 2.8% 2.9% 2.8% 3.9% 4.6% 2.9% 4.1% 4.3% 2.9% 3.9% 4.4%
Employees EOP (number) 1,378 1,380 1,602 1,630 1,978 2,697 3,315 3,183 2,844 2,840 2,880 2,780 2,655 2,682 2,623 2,638 1,028 1,031 1,083 1,129 1,227
Sales/employee 2.87 2.88 2.42 2.37 2.56 2.53 2.76 2.93 2.69 2.78 2.85 2.76 2.88 2.95 2.98 3.14 3.73 3.83 3.75 3.82 3.73
EBIT/employee 0.11 0.11 0.08 0.12 0.15 0.16 0.20 0.16 0.09 0.12 0.14 0.10 0.13 0.17 0.19 0.12 0.21 0.23 0.17 0.22 0.24
Note: Figures until 2016/2017 include Alligo/Momentum Group

Source: Bergman & Beving company filings (financial figures), Redeye Research (table structuring)
Addlife: Mean reversion crashed the party
COVID-19 gave Addlife’s organic growth an IV shot of adrenaline (c38% in 2020 and c11% in
2021). However, to cite one of Ben Graham’s favourite quotes from Horace: “Many shall be
restored that now are fallen and many shall fall that now are in honour.” As COVID-related
product demand waned in 2022, Addlife’s organic growth experienced a considerable negative
development.
Further, the company seemed to get a little loose with leverage in recent years. At the end of
Q4 2022, Addlife sported a net financial liabilities/EBITDA ratio of c3.5x. We judge that Addlife
will need to focus on deleveraging in the coming year or two, especially if the company’s
pandemic-fuelled margin expansion reverses, thus increasing net debt/EBITDA further. We like
the company’s relatively non-cyclical nature outside of once-in-a-lifetime pandemics. However,
we believe it overreached somewhat regarding acquisition size and valuations paid in recent
years.
From 2016 to 2022, Addlife grew net sales from cSEK1,938m to cSEK9,084m, representing a
CAGR of c29.4%. EBITA increased from cSEK189m to cSEK1,221m over the same period
(CAGR c36.5%). Thus, EBITA margin increased from c9.8% to c13.4% over these six years. The
company’s M&A volume increased moderately from three acquisitions in 2016 to five in 2022.
However, Addlife’s size per acquisition increased considerably, especially in 2021. Notably,
Addlife acquired net sales and EBITA of cSEK2.5bn and cSEK309m in 2021. These numbers
are considerably above the company’s 2016-2022 average acquired yearly sales (mean
cSEK819m, median cSEK750m). The same applies to acquired yearly EBITA (mean cSEK107m,
median cSEK56m).
Further, Addlife paid EV/EBITA multiples of c7-8x for acquisitions in 2016-2022 (mean c7.1-
7.7x, median c6.1-6.4x). In contrast, its 2021 acquisitions came at EV/EBITA multiples of c15.0-
16.0x, potentially on COVID-boosted earnings. However, Addlife paid for a considerable portion
of its 2021 acquisitions with its own shares, which fetched a notably higher valuation than its
acquisition targets. Notably, Addlife’s shares outstanding have increased from c98.5m (4:1
split-adjusted) at year-end 2016 to c121.8m at the end of 2022.
16
Addlife: Historical key financials and M&A

SEKm 2012/13 2013/14 2014/15 2015/16 2016* 2017 2018 2019 2020 2021 2022
Net sales 907 984 1,057 1,562 1,486 2,333 2,482 3,479 5,273 7,993 9,084
Net sales growth (%) nd 8.5% 7.5% 47.8% 33.9% 20.4% 6.4% 40.2% 51.6% 51.6% 13.7%
Organic growth (%) nd 8% 5% 5% 13% 5% 0% 5% 38% 11% -12%
Acquired growth (%) nd 1% 0% 44% 20% 14% 3% 34% 17% 43% 22%
FX effects/other (%) nd -1% 2% -1% 1% 1% 3% 1% 3% -2% 4%
EBITA 110 116 120 135 154 234 245 305 802 1,273 1,221
EBITA margin (%) 12.1% 11.8% 11.3% 8.7% 10.3% 10.0% 9.9% 8.8% 15.2% 15.9% 13.4%
Number of acquisitions 2 0 0 2 3 3 5 4 6 5 5
Previous year sales 50 na na 650 185 225 755 278 648 2,613 852
Previous sales/acq 25 na na 325 62 75 151 70 108 523 170
Acquired sales** nd na na 643 188 196 750 272 783 2,530 1,011
Acquired EBITA** nd na na 47 27 38 56 52 94 309 174
EBITA margin (%) na na na 7.3% 14.2% 19.4% 7.5% 19.2% 12.0% 12.2% 17.2%
Acquired sales/acq na na na 322 63 65 150 68 131 506 202
Acquired EBITA/acq na na na 24 9 13 11 13 16 62 35
Net cash deployed on acq 12 0 0 231 150 296 336 325 345 2,843 818
CCs for previous acq 0 0 0 0 6 0 7 0 0 6 31
Purchase consideration*** 12 na na 467 142 289 436 318 341 4,646 775
Contingent consideration 2 na na 6 26 28 16 18 70 283 21
Total consideration 13 na na 474 168 317 452 336 411 4,929 796
Deferred/total (%) 12% na na 1% 15% 9% 3% 5% 17% 6% 3%
Net acq/previous sales (x) 0.2 na na 0.4 0.8 1.3 0.4 1.2 0.5 1.1 1.0
EV/Sales initial**** (x) na na na 0.7 0.8 1.5 0.6 1.2 0.4 1.8 0.8
EV/EBITA initial**** (x) na na na 9.9 5.3 7.6 7.8 6.1 3.6 15.0 4.5
EV/Sales total**** (x) na na na 0.7 0.9 1.6 0.6 1.2 0.5 1.9 0.8
EV/EBITA total**** (x) na na na 10.1 6.3 8.3 8.1 6.4 4.4 16.0 4.6
Note: *2016: shortened financial year (01 April 2016 - 31 December 2016), LTM net sales and EBITA amounted to SEK1,938m and SEK189m, **full-year
figures disclosed for acquired companies in the year of acquisition; 2019 figures are Redeye estimates, 2016 figures annuali sed; ***net of acquired cash,
****based on full-year figures in year of acquisition; 2016 figures annualised
Source: Addlife company filings (financial figures), Redeye Research (table structuring)
17
Addlife: Historical M&A

Addlife: Number of acquisitions and acquired pro forma sales and EBITA (SEKm) per year
3,000 7
Acquired EBITA (acquisition year) 6
2,500
5
2,000
1,500
1,000
2
500
1
0 0
2012/13 2013/14 2014/15 2015/16 2016* 2017 2018 2019 2020 2021 2022
Addlife: Purchase considerations (SEKm) and paid EV/EBITA multiples (x) over time
6,000 18
Purchase consideration (SEKm) Contingent consideration (SEKm) EV/EBITA initial (x) EV/EBITA total (x)
16
5,000
14
4,000 12
10
3,000
8
2,000 6
4
1,000
2
0 0
2012/13 2013/14 2014/15 2015/16 2016* 2017 2018 2019 2020 2021 2022
Source: Addlife company filings (financial figures), Redeye Research (chart structuring)
Momentum Group: No slowdown in acquisition pace
For those interested in Momentum Group, we delved deeper into the company in our Q3 2022
report. Momentum Group entered the quarter with a stronger financial position than most serial
acquirers. It made two acquisitions in Q4 2022: Börjesson Pipe Systems, which has shown
impressive average operating margins of >20% since 2012 and solid sales growth (cSEK24m
in 2012 and cSEK37m in 2021, representing a CAGR of c5%). The other acquisition was a bolt -
on acquisition of JOKRAB by the business unit Öbergs. JOKRAB has cSEK30m in sales and an
estimated operating margin of c15%. It also announced one acquisition after quarter-end:
Hydmos Industriteknik, with normalised sales of SEK17m (2022 sales of SEK30m due to a one -
off).
Momentum Group reported solid Q4 numbers with c11% organic sales growth and an EBITA
margin of c11.3%, down marginally y/y (11.5%). We believe it will continue to execute its M&A
strategy. The company’s net debt/EBITDA ratio is below c1x, and Momentum has a committed
line of credit amounting to SEK1bn, of which SEK952m is currently unutilised. CEO Ulf Lilius
noted that he believes the company is set for continued profitable growth in 2023, despite a
more pessimistic economic outlook.
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Teqnion: Compounder in the making?
We judge that Teqnion is a relatively small serial acquirer that could follow in the footsteps of
best-in-class peers. We like management’s philosophy of seeking the right cultural fit and cheap
or reasonable valuations in potential acquirees. From the outside, everything looks like the
company could transform into a compounding machine in the long term. However, we would
like to see some additional years of prudent capital allocation. Further, we will pay close
attention to how the company weathers a likely imminent recession, both operationally and on
the M&A side.
Teqnion is a rather sector-agnostic serial acquirer, and the company sports a somewhat
eclectic set of subsidiaries. Several subsidiaries operate in relatively cyclical industries like
building and construction. Thus, it is rather hard to gauge how the company will weather a
potential storm on the economic horizon and whether its recent growth and margin expansion
are durable or partly due to a strong economic climate.
Teqnion has grown net sales from cSEK179m in 2016 to cSEK1,325m in 2021, representing a
CAGR of c39.6%. EBITA margin has expanded from c7.8% to c11.0% over that period, i.e., EBITA
grew from cSEK14m to cSEK146m (CAGR c47.8%). M&A volume has increased from zero
acquisitions in 2016 to four in 2022 (mean 2.4 per year, median 2.0 per year). Teqnion’s
acquirees sported net sales of cSEK50m (mean cSEK49.0m, median cSEK50.9m) and EBIT of
cSEK6m (mean and median cSEK6.2m). Net of acquired cash, Teqnion seemingly pays
relatively low multiples for acquirees (mean EV/EBIT c2.4-4.4x, median 2.7-4.2x).
Teqnion: Historical key financials and M&A

SEKm 2016 2017 2018 2019 2020 2021 2022
Net sales 179 197 296 580 659 920 1,325
Net sales growth (%) 2.3% 10.3% 50.3% 95.7% 13.7% 39.6% 50.8%
Organic growth (%) nd nd nd nd 1% 12% 15%
EBITA 14 18 38 71 61 106 146
EBITA margin (%) 7.8% 9.2% 12.8% 12.2% 9.3% 11.5% 11.0%
Number of acquisitions 0 1 3 2 2 5 4
Previous year sales* na 20 203 140 105 246 139
Previous year EBIT* na 3 17 14 19 33 23
EBIT margin (%) na 13.5% 8.4% 10.1% 17.6% 13.5% 16.5%
Previous year sales/acq na 20 68 70 53 49 35
Previous year EBIT/acq na 3 6 7 9 7 6
Net cash deployed on acq 8 4 57 50 59 159 133

CCs for previous acq 8 0 0 5 15 16 49
Purchase consideration** 0 2 54 31 20 114 95
Contingent consideration 0 2 47 19 40 49 79
Total consideration 0 4 101 50 60 163 174
Contingent/total (%) na 52% 46% 38% 67% 30% 46%
EV/Sales initial (x) na 0.1 0.3 0.2 0.2 0.5 0.7

EV/EBIT initial (x) na 0.7 3.2 2.2 1.1 3.4 4.1
EV/Sales total (x) na 0.2 0.5 0.4 0.6 0.7 1.3
EV/EBIT total (x) na 1.4 5.9 3.6 3.2 4.9 7.6
Note: *As disclosed by Teqnion, acquisition year numbers and EBITA instead of EBIT for 2022, **net of acquired cash
Source: Teqnion company filings (financial figures), Redeye Research (table structuring)
On average, c46% of the maximum considerations in Teqnion’s M&A deals constitute

contingent considerations, though the company seems to rarely pay even half of the maximum
contingent considerations in years following acquisitions. On the one hand, one might argue
that Teqnion seeking out the best deals irrespective of sector lets them acquire companies at
very low valuations. On the other hand, we might have misinterpreted the company’s disclosure,
or the low multiples are simply an artefact of acquired companies being cyclical. Notably, we
19
understand that Teqnion usually looks at average numbers over several years when acquiring
companies.
EV/EBIT multiples paid seem to have increased moderately in recent years. Specifically,
average EV/EBIT multiple paid in 2021-2022 amounted to c3.8x based on the initial
consideration net of acquired cash. Further, including contingent considerations the average
maximum EV/EBIT multiple paid rose to c6.2x during that period. We judge that somewhat
higher acquisition multiples primarily derive from Teqnion acquiring less cyclical and higher
quality companies in recent years.
Teqnion: Historical M&A

Teqnion: Number of acquisitions and previous year sales and EBIT (SEKm)
300 6
Previous year sales Previous year EBIT Number of acquisitions (rhs)
250 5
200 4
150 3
100 2
50 1
0 0
2016 2017 2018 2019 2020 2021 2022
Teqnion: Purchase considerations (SEKm) and paid EV/EBIT multiples (x) over time
2016.5 2017 2017.5 2018 2018.5 2019 2019.5 2020 2020.5 2021 2021.5
180 7
Purchase consideration (SEKm) Contingent consideration (SEKm) EV/EBIT initial (x) EV/EBIT total (x)
160
6
140
5
120
100 4
80 3
60
2
40
1
20
0 0
2017 2018 2019 2020 2021
Source: Teqnion company filings (financial figures), Redeye Research (chart structuring)
20
Volati: Bolt-ons and some notes on comparables
Volati, like Bergman & Beving and Momentum Group, is a serial acquirer of industrial
companies. Volati has a strategy of having strong platform businesses that conduct bolt-on
acquisitions. The value creation in bolt-ons derives from synergies, i.e., Volati acquires a
company for an EV/EBITA multiple of c8x. Extracting synergies, the company increases profit,
resulting in a post-synergy EV/EBITA multiple of c5x. Volati made one typical but small bolt-on
acquisition in the fourth quarter of Embo Import with sales of cSEK25m, consolidated into Salix
Group.
Volati has three business areas: Etiketto Group, Industry and Salix Group. Etiketto Group and
Industry had a solid end to the year. In contrast, Salix Group posted somewhat softer numbers
in Q4 2022. The main reason is the business area’s exposure to consumers, around 20%. Higher
freight costs, material prices and the weak SEK have driven down the business area’s
profitability for the year. As a result, we understand that Salix Group currently focuses on cost
control and pricing.
Etiketto Group posted a challenging H1 2022 due to a supplier strike in Finland, losing cSEK25m
in sales and cSEK10m in profit during the first quarter. We understand that the negative
consequences of the supplier strike persisted into Q2 2022. We gather that Etiketto managed
to recover somewhat in H2 2022. However, its focus on delivering to existing customers
reduced new customer intake, negatively impacting growth.
Within Industry, Tornum (the first business Volati bought) lost cSEK40m in sales and cSEK25m
in EBITA in 2022 due to its exposure to Ukraine and Russia. As Ukraine and Russia are large
grain producers, both are potentially important markets for Tornum. Russia was a relatively
untapped market for the company, so its impact is minor; however, its disappearance could
somewhat hamper future growth prospects. Ukraine is a more important market for the
company. Still, sales to both countries comprised less than 10% of total sales in 2021. Tornum
is active across Europe, and we believe the overall impact on Volati is minor.
Corroventa Sweden: Net sales and EBIT in 2015-2021

350 35%
Net sales EBIT EBIT margin (%, rhs)
300 30%
250 25%
200 20%
150 15%
100 10%
50 5%
0 0%
2015 2016 2017 2018 2019 2020 2021
Source: allabolag.se (financial figures), Redeye Research (chart structuring)
In our Q3 update, we mentioned Volati’s subsidiary Corroventa, selling and renting products
dealing with water damage, moisture, odours, and radon. Specifically, Corroventa posted soft
2022 figures due to lower rainfall in Europe, negatively impacting sales in Q3-Q4, usually the
strongest quarters for the company. We have looked at the historical figures for the Swedish
part of the company and have some interesting findings to share.
While its profits are volatile, we note that the ‘base’ profit is solid and that the company
sometimes gets a cherry on top of this. While volatile profits present challenges for number
21
crunchers like us (we want to see improving profits year after year in our DCF models), we
believe normalised earnings can solve this challenge. Judging by the last seven years, the
average EBIT margin has been c22.6% with a mid-single-digit top-line growth rate.
Volati: The long-term view
Karl Perlhagen and Patrik Wahlén founded Volati in 2003, making their first acquisition
(Tornum) in 2004. Net sales have grown from cSEK83m in 2004 to cSEK6.1bn in 2018,
representing a CAGR of c35.9%. EBITA increased from cSEK7m to cSEK433m during the same
period (CAGR c34.3%). In 2020, Volati divested its consumer business area (Besikta Bilprovning,
NaturaMed Pharma, me&I). Further, the company spun off Bokusgruppen to shareholders in
2021. The remaining operations have grown net sales from c4.1bn in 2019 to cSEK 7.8bn in
2022, corresponding to a CAGR of c23.2%. EBITA increased at a CAGR of c31.5% during that
period, from cSEK312m to cSEK710m.
The company made an average of c4-5 (mean 4.6, median 4.0) acquisitions annually in 2018-
2022. Volati has acquired subsidiaries at average EV/Sales multiples of c0.5-0.6x and EV/EBITA
multiples of c7-9x during that period. Note that these multiples are calculated based on
disclosed financial performance in the year of acquisition. Some of Volati’s subsidiaries operate
in cyclical industries; thus, financial performance in a single year may not represent an average
performance over a whole business cycle. Further, as discussed previously, the company seeks
to extract synergies in bolt-on acquisitions, effectively reducing the paid multiple.
Volati: Historical key financials and M&A

SEKm 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Net sales* 83 164 253 376 536 533 715 1,036 1,045 1,509 1,656 2,188 3,206 4,356 6,084 4,145 4,921 6,309 7,751
Net sales growth (%) na 98.1% 54.8% 48.4% 42.5% -0.5% 34.1% 44.9% 0.9% 44.4% 9.7% 32.1% 46.5% 35.9% 39.7% na 18.7% 28.2% 22.9%
Organic net sales growth (%) na 20.6% 8.5% 12.6% 33.8% -26.1% 3.6% 22.0% -6.5% 5.2% -1.7% 4.6% 9.7% -2.3% 1.2% nd nd 10% 3%
Acquired growth (%) na 77.4% 46.4% 35.9% 8.8% 25.7% 30.6% 22.8% 7.3% 49.1% 26.7% 29.7% 37.4% 37.8% 37.6% nd nd 19% 18%
EBITA* ** 7 16 28 66 60 76 69 115 89 137 215 227 318 377 433 312 421 664 710
EBITA margin (%) 8.5% 9.8% 11.0% 17.5% 11.2% 14.3% 9.7% 11.1% 8.5% 9.1% 13.0% 10.4% 9.9% 8.7% 7.1% 7.5% 8.6% 10.5% 9.2%
Organic EBITA growth (%) nd nd nd nd nd nd nd 37% -38% 35% 15% -20% 28% -18% 0% nd 41% 36% -8%
Number of acquisitions*** 1 2 1 1 2 1 2 0 1 2 1 2 4 3 1 4 4 8 6
Previous year sales 87 96 nd nd nd nd nd na nd nd 192 1,069 227 2,444 1,038 212 758 1,084 824
Previous sales/acq 87 48 na na na na na na na na 192 534 57 815 1,038 53 190 136 137
Acquired sales**** 94 108 nd 101 70 160 381 na 213 692 185 1,107 191 2,424 1,061 178 804 1,156 992
Acquired EBITA**** 10 22 nd 43 16 23 33 na 28 115 54 109 5 139 33 16 51 76 167
EBITA margin (%) 10.8% 20.4% na 42.8% 22.8% 14.4% 8.6% na 13.3% 16.6% 29.2% 9.9% 2.8% 5.7% 3.1% 9.0% 6.3% 6.6% 16.8%
Acquired sales/acq 94 54 na 101 35 160 190 na 213 346 185 554 48 808 1,061 45 201 145 165
Acquired EBITA/acq 10 11 na 43 8 23 16 na 28 58 54 55 1 46 33 4 13 10 28
Net cash deployed on acq 47 73 13 130 61 -24 228 3 0 -94 296 592 261 552 544 127 -828 751 472
Paid deferred considerations, net 0 6 3 15 1 0 8 0 0 0 0 0 122 7 114 6 13 23 13
Purchase consideration***** 47 67 10 114 44 36 220 5 118 213 297 674 140 568 435 121 245 727 475
Deferred consideration 6 15 5 1 6 10 26 3 24 222 0 0 1 10 145 0 33 24 63
Total consideration 53 82 15 115 50 46 247 8 143 435 297 674 141 578 580 121 278 751 538
Deferred/total (%) 11% 18% 34% 1% 12% 21% 11% 40% 17% 51% 0% 0% 1% 2% 25% 0% 12% 3% 12%
Net acq/previous sales (x) 0.5 0.8 na na na na na na na na 1.5 0.6 1.1 0.2 0.5 0.6 neg 0.7 0.6
EV/Sales initial****** (x) 0.5 0.6 na 1.1 0.6 0.2 0.6 na 0.6 0.3 1.6 0.6 0.7 0.2 0.4 0.7 0.3 0.6 0.5
EV/EBITA initial****** (x) 4.7 3.0 na 2.6 2.8 1.5 6.7 na 4.2 1.9 5.5 6.2 26.4 4.1 13.2 7.6 4.8 9.6 2.8
EV/Sales total****** (x) 0.6 0.8 na 1.1 0.7 0.3 0.6 na 0.7 0.6 1.6 0.6 0.7 0.2 0.5 0.7 0.3 0.6 0.5
EV/EBITA total****** (x) 5.2 3.7 na 2.6 3.2 2.0 7.5 na 5.1 3.8 5.5 6.2 26.6 4.2 17.6 7.6 5.5 9.9 3.2
Note: *2019-2020 exclude discontinued operations (Sales of consumer businesses 2020 and Bokusgruppen spin-off 2021); organic growth for 2019 sans the divested consumer business was
not disclosed, **excluding capital gains from the following divestments: SEK32m from real estate sale in 2007; SEK11m from Sv eico divestiture in 2009; SEK27m from subsidiary and real estate
divestitures in 2011; SEK189m from TeamOlmed divestiture in 2013, ***only acquisitions of operational companies, minor acquis itions of dormant or holding companies excluded from number
of acquisitions, ****full-year pro forma figures disclosed for acquired companies in the year of acquisition; 2012-2013 figures based on financial performance in following years due to insufficient
disclosure in years of acquisition; 2005-2010 profit figures constitute disclosed EBIT of acquirees, *****net of acquired cash and including repaid liabilities at acquisition, for 2012 we used the
purchase price that Volati 2 paid for Etikettoprintcom Holding AB, ******based on full -year figures in year of acquisition
Source: Volati company filings (financial figures), Redeye Research (table structuring)
In contrast to many other Swedish serial acquirers, Volati has been relatively active on the
divestiture/spin-off side over its 20-year history. For example, the company acquired
Bokusgruppen (Akademibokhandeln) in 2017 and spun it off again in 2021. The company
acquired Sveico, Kökskungen, and Gastromax in 2005-2006 and divested them in 2009-2010.
Further, Volati acquired Olmed Ortopediska and Team Ortopedteknik Scandinavia in 2009-2010,
22
followed by their divestiture in 2013. Lastly, Volati’s consumer businesses (Besikta, me&I, NMP)
joined the group in 2013-2014 and were sold in 2020.
Volati: Historical M&A

Volati: Number of acquisitions and acquired pro forma sales and EBITA (SEKm) per year
3,000 9
8
Acquired EBITA (acquisition year)
2,500
7
2,000 6
5
1,500
4
1,000 3
2
500
1
0 0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Volati: Purchase considerations (SEKm) and paid EV/EBITA multiples (x) over time
2011.5 2012.5 2013.5 2014.5 2015.5 2016.5 2017.5 2018.5 2019.5 2020.5 2021.5 2022.5
800 30
700
EV/EBITA initial (x)
25
EV/EBITA total (x)
600
20
500
400 15
300
10
200
5
100
0 0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Source: Volati company filings (financial figures), Redeye Research (chart structuring)
23
Lifco: The OG acquirer
Lifco is among the most notorious Swedish serial acquirers, with its share appreciating over
700% since its most recent listing on Nasdaq Stockholm in 2014. Lifco, originally part of
Getinge, was spun out to shareholders in 1998. After only two troublesome years as a public
company, majority owner Carl Bennet took the company private. After some internal clean up,
Lifco bought the industrial conglomerate Sorb Industri AB from Carl Bennet’s holding company
Carl Bennet AB in 2006. Since then, Lifco has embarked on its serial acquirer journey and went
public again in late 2014. Since its 2014 IPO, the company’s share count has remained
unchanged, except for a 5:1 split in 2021.
The company grew net sales from cSEK2.6bn in 2006 to cSEK21.6bn in 2022, representing a
CAGR of c14.1%. The company’s EBITA increased from cSEK280m to cSEK4.7bn over the same
period (CAGR c19.2%). Net sales growth in 2006-2022 mainly derived from high-single-digit
acquired growth (CAGR c9.3%) and mid-single-digit organic growth (c4.6%). Lifco ramped its
deal volume from three acquisitions in 2006 to 12 in 2022, down somewhat from its all-time-
high of 17 in 2021. Notably, it usually buys companies for c6-7x EBITA (mean 5.7-6.6, median
5.8-6.7 using acquisition year figures). The company often buys 100% of shares in acquirees,
with an average of c14% of the maximum consideration constituting a contingent
consideration.
Lifco has three major business areas: Dental (c25% of 2022 sales), Demolition & Tools (c29%),
and System Solutions (c46%). All three business areas have posted respectable growth over
the years. Dental grew net sales and EBITA at CAGRs of c11.8% and c15.5% in 2006-2022.
Demolition & Tools posted net sales and EBITA growth of c19.3% and c18.2% over the same
period. Lastly, Systems Solutions grew these figures by CAGRs of c13.3% and c20.8% in 2006-
2022. Lifco’s primary market is Europe, with c80% of 2022 sales. North America, Asia &
Australia, and rest of world represented c11%, c8%, and c1% of 2022 sales, respectively.
Lifco: Historical key financials and M&A

SEKm 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Net sales 2,629 3,660 4,901 4,146 4,591 5,707 6,184 6,030 6,802 7,901 8,987 10,030 11,956 13,845 13,782 17,480 21,552
Net sales growth (%) 16.9% 39.2% 33.9% -15.4% 10.7% 24.3% 8.4% -2.5% 12.8% 16.2% 13.7% 11.6% 19.2% 15.8% -0.5% 26.8% 23.3%
Organic growth (%) 15.6% 14.4% 7.4% -19.8% 15.7% 7.9% -1.8% -1.4% 4.4% 5.7% 2.5% 2.1% 6.4% 4.2% -5.8% 15.3% 11.3%
Acquired growth (%) 1.5% 25.3% 25.2% 0.4% 0.6% 20.5% 11.7% 0.1% 5.1% 7.3% 11.3% 8.6% 8.6% 8.2% 7.0% 13.2% 8.7%
FX effects/other (%) -0.2% -0.5% 1.3% 3.9% -5.5% -4.2% -1.5% -1.2% 3.3% 3.2% -0.1% 0.9% 4.2% 3.4% -1.7% -1.7% 5.1%
EBITA 280 412 453 305 511 631 715 692 966 1,186 1,377 1,732 2,168 2,523 2,702 3,709 4,662
EBITA margin (%) 10.7% 11.3% 9.2% 7.4% 11.1% 11.1% 11.6% 11.5% 14.2% 15.0% 15.3% 17.3% 18.1% 18.2% 19.6% 21.2% 21.6%
Number of acquisitions 3 7 3 3 1 4 1 0 1 7 11 13 10 6 10 17 12
Previous year sales* 129 1,353 214 53 45 1,442 73 0 417 573 1,340 928 527 1,272 773 1,922 1,168
Previous sales/acq 43 193 71 18 45 360 73 na 417 82 122 71 53 212 77 113 97
Acquired sales** nd nd nd nd nd nd 60 0 531 653 1,253 1,025 584 1,350 651 2,274 1,618
Acquired EBITA** nd nd nd nd nd nd 21 0 177 107 204 223 110 287 154 595 353
EBITA margin (%) na na na na na na 34.8% na 33.3% 16.4% 16.3% 21.8% 18.8% 21.3% 23.7% 26.2% 21.8%
Acquired sales/acq na na na na na na 60 na 531 93 114 79 58 225 65 134 135
Acquired EBITA/acq na na na na na na 21 na 177 15 19 17 11 48 15 35 29
Net cash deployed on acq 103 843 182 76 663 1,771 90 0 1,264 573 1,608 1,378 500 1,781 1,056 2,990 2,399
CCs for previous acq na na na na na na 20 0 0 46 1 6 10 72 45 116 321
Purchase consideration*** nd nd nd nd nd nd 70 0 1,264 527 1,607 1,372 490 1,709 1,011 2,874 1,974
Contingent consideration nd nd nd nd nd nd 24 0 0 0 42 212 205 452 183 622 273
Total consideration na na na na na na 94 0 1,264 527 1,649 1,584 695 2,161 1,194 3,496 2,247
Contingent/total (%) na na na na na na 26% nd 0% 0% 3% 13% 29% 21% 15% 18% 12%
Net acq/previous sales (x) 0.8 0.6 0.9 1.4 14.7 1.2 1.2 na 3.0 1.0 1.2 1.5 0.9 1.4 1.4 1.6 2.1
EV/Sales initial**** (x) na na na na na na 1.2 na 2.4 0.8 1.3 1.3 0.8 1.3 1.6 1.3 1.2
EV/EBITA initial**** (x) na na na na na na 3.3 na 7.1 4.9 7.9 6.2 4.5 6.0 6.6 4.8 5.6
EV/Sales total**** (x) na na na na na na 1.6 na 2.4 0.8 1.3 1.5 1.2 1.6 1.8 1.5 1.4
EV/EBITA total**** (x) na na na na na na 4.5 na 7.1 4.9 8.1 7.1 6.3 7.5 7.8 5.9 6.4
Note: *reported local currency figures converted to SEK using average exchange rate in year of acquisition , **full-year pro forma figures disclosed for acquired
companies in the year of acquisition; 2012-2014 net sales and EBITA figures include estimates due to insufficient disclosure , ***net of acquired cash, ****based on full-
year figures in year of acquisition
Source: Lifco company filings (financial figures), Redeye Research (table structuring)
24
While markets soured in 2022, Lifco showed no signs of slowing down. The company closed
12 acquisitions in 2022 and grew net sales and EBITA by c23% and c26% y/y. Its net interest -
bearing debt to EBITDA ratio amounted to c1.1x at the end of 2022, leaving plenty of room for
further acquisitions. While Lifco’s stock is down c25% from its peak in late 2021, we judge that
the company finds itself in a solid position. Specifically, Lifco can continue executing its M&A
agenda, undeterred by souring markets, as the excesses of 2020-2021 disappear.
Further, the company exhibited strong organic growth of c11% in 2022 and managed to keep
its EBITA margin stable at 21.6% (21.2%). In other words, the company is firing on all cylinders.
While Lifco’s size will probably prevent it from delivering the returns it has posted in the past
eight years, we judge the company as worth keeping an eye out for.
Lifco: Historical M&A

Lifco: Number of acquisitions and acquired pro forma sales and EBITA (SEKm) per year
2,500 18
Acquired sales (acquisition year) 16
Acquired EBITA (acquisition year)
2,000
Number of acquisitions (rhs) 14
12
1,500
10
8
1,000
4
500
0 0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Lifco: Purchase considerations (SEKm) and paid EV/EBITA multiples (x) over time
2011.5 2013.5 2015.5 2017.5 2019.5 2021.5
4,000 9
Purchase consideration (SEKm) Contingent consideration (SEKm) EV/EBITA initial (x) EV/EBITA total (x)
3,500 8
7
3,000
6
2,500
5
2,000
4
1,500
3
1,000
2
500 1
0 0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Source: Lifco company filings (financial figures), Redeye Research (chart structuring)
25
Röko: Fredrik Karlsson is back with a vengeance
Fredrik Karlsson was Lifco’s CEO from 1998-2019. In early February 2019, he was
unceremoniously fired following a dispute over his compensation package with majority owner
of Lifco, Carl Bennet (who currently controls c50% of capital and c69% of votes). Mr Karlsson
did not wait long to start his next serial acquirer Röko together with former Nordstjernan CEO
Tomas Billing. According to public records, Röko’s incorporation dates to February 2019, less
than one month after Karlsson’s two-decade stint as Lifco CEO ended. The company made its
first acquisition in the summer of the same year. As described above, Lifco is one of the most
notorious serial acquirers on Nasdaq Stockholm and has continued to perform well even after
Mr Karlsson’s departure. Still, we believe he was essential in shaping Lifco as a quality serial
acquirer.
While Lifco focuses on specific niches (its Systems Solutions segment could be argued to be
rather diversified), Röko seems sector agnostic, owning everything from beauty retailers to
software companies across Scandinavia, the UK, and the Netherlands. Alternatively, one might
describe the company’s current niche as ‘growing and profitable businesses at cheap
valuations.’
History and drama aside, Mr Karlsson is back with a vengeance. According to Röko’s Q4 2022
earnings presentation, he and Mr Billing control c10.1% of capital and c28.7% of votes each.
Together, Röko’s founders (Karlsson, Billing, Johan Bladh, and Anders Nordby) controlled
c24.7% of capital and c73.1% of votes at the end of 2022. Their higher share of votes derives
from their holdings of A shares with 10 votes each, while other investors own B shares with one
vote each. We understand that the company has raised cSEK3.3bn of equity capital from
inception to year-end 2022, with Messrs Karlsson and Billing themselves committing
cSEK109m each, putting their money where their mouths are.
Sticking to serial acquirer tradition, Röko’s headquarters are lean with seven full-time
employees, delegating day-to-day decision-making to business unit CEOs in a decentralised
organisational structure. In contrast to Lifco, Röko usually only buys c60-85% of companies,
with previous owner-operators remaining as CEOs and minority owners. Notably, Mr Karlsson
has mentioned that when analysing Lifco’s acquisitions, he noted that acquirees with sellers
staying on as minority owners tended to outperform wholly-owned subsidiaries after joining the
group. The company has usually entered put/call option contracts with minority owners to buy
them out eventually. Röko carries these puts/calls as a liability on its balance sheet, valued
based on the net cash outflow upon exercise.
As of Q4 2022, Röko had closed on 25 acquisitions since its inception, reaching pro forma LTM
net sales and EBITA of cSEK5.3bn and cSEK1.0bn, respectively (EBITA margin c19%). From
inception to the end of Q4 2022, Röko seems to have raised cSEK2.1bn of interest-bearing debt
(excluding lease liabilities and earn-outs, net debt cSEK1.6bn). The company has additional
capital commitments of cSEK450m from existing owners and a new credit facility amounting
to cSEK400m. Including put/call option debt and contingent considerations, Röko’s financial
net debt/LTM adjusted EBITDA ratio amounted to c3.3x at the end of Q4 2022 (the company’s
financial target for this measure amounts to ≤3.0).
Thus, Röko has seemingly ready access to additional M&A firepower as a private company. A
potential IPO may, therefore, not be necessary to continue financing the company’s M&A
agenda. Still, Mr Karlsson is known as fiercely competitive and would likely welcome measuring
himself with the ‘big boys’ on Nasdaq Stockholm. He has publicly hinted at a potential listing in
recent interviews, but Röko does not seem to be in a hurry. Starting in early 2022, Röko began
releasing annual and quarterly reports, indicating that the company is gearing up internally for
a potential listing when market conditions are suitable. We guesstimate that we might see the
company list sometime between now and 2025e. Further, on the company’s Q4 2022 earnings
call, Mr Karlsson remarked that the company could list some four months after making the
26
decision to do so. However, given the current uncertainty in the economy and financial markets,
Röko awaits the right moment to conduct its IPO. We judge that Röko is undoubtedly worth
watching given Mr Karlsson’s track record.
Röko: Historical key financials and M&A

SEKm 2019 2020 2021 2022
Net sales 23 614 2,083 4,316
Net sales growth (%) na 2569.6% 239.3% 107.2%
Organic growth (%) na nd 12.7% 6.7%
Acquired growth (%) na nd 225.6% 95.5%
FX effects/other (%) na nd 1.0% 5.1%
EBITA -3 125 403 787
EBITA margin (%) -13.0% 20.4% 19.3% 18.2%
Number of acquisitions 5 4 9 6
Acquired sales* 458 549 1,997 1,684
Acquired EBIT* 72 107 289 301
EBIT margin (%) 15.7% 19.5% 14.5% 17.9%
Acquired sales/acq 92 137 222 281
Acquired EBIT/acq 14 27 32 50
Net cash deployed on acq 694 382 1,789 2,438

CCs for previous acq 0 17 54 287
Purchase consideration** 694 365 1,735 2,151
Contingent consideration*** 191 257 779 914
Total consideration 885 622 2,514 3,065
Contingent/total (%) 22% 41% 31% 30%
EV/Sales initial**** (x) 1.5 0.7 0.9 1.3

EV/EBIT initial**** (x) 9.6 3.4 6.0 7.1
EV/Sales total**** (x) 1.9 1.1 1.3 1.8
EV/EBIT total**** (x) 12.3 5.8 8.7 10.2
Note: *full-year pro forma figures disclosed for acquired companies in the year of acquisition, **net of acquired
cash, ***including put/call options to buy minority interests, ****based on full-year figures in year of acquisition
Source: Röko company filings (financial figures), Redeye Research (table structuring)
27
Röko: Historical M&A

Röko: Number of acquisitions and acquired pro forma sales and EBITA (SEKm) per year
2,500 10
2,000 8
1,500 6
1,000 4
500 2
0 0
2019 2020 2021 2022
Röko: Purchase considerations (SEKm) and paid EV/EBIT multiples (x) over time
2018.5 2019 2019.5 2020 2020.5 2021 2021.5 2022 2022.5
3,500 14
Purchase consideration (SEKm) Contingent consideration (SEKm) EV/EBIT initial (x) EV/EBIT total (x)
3,000 12
2,500 10
2,000 8
1,500 6
1,000 4
500 2
0 0
2019 2020 2021 2022
Source: Röko company filings (financial figures), Redeye Research (chart structuring)
28
Roll-ups
“A roll-up strategy is the process of acquiring and merging multiple smaller companies in the same
industry and consolidating them into a large company. Combining small firms into a larger
company allows the latter to pull their resources together, cut down on operational costs, and
increase revenues.” – Corporate Finance Institute
We have summarised the fourth-quarter acquisition pace of Instalco, Fasadgruppen, Green

Landscaping and Norva24, companies we deem roll-ups and track continuously.
• Instalco made three acquisitions compared to six in Q4 2021
• Fasadgruppen made one acquisition versus eight in Q4 2021
• Green Landscaping made four acquisitions compared to four in Q4 2021
• Norva24 made one acquisition
Instalco: Paring a tougher economic environment relatively well
Instalco has substantially ramped up its M&A volume, increasing from six acquisitions in 2015
to 16 in 2022. Similarly, the company has increased acquired yearly sales and EBIT from
cSEK832m and cSEK50m in 2016 to cSEK1,686 and cSEK261m in 2022 (not disclosed for
2015). The company has grown net sales from cSEK1,369m in 2015 to cSEK 12,063m in 2022,
representing a CAGR of c36%. Outpacing net sales growth, EBITA has increased at a CAGR of
c52% over the same period due to EBITA margin expansion from c3.6% in 2015 to c7.6% in
2022.
While 2022 seems to be a somewhat slower year with 16 acquisitions (27 in 2021) and
cSEK1,686m in acquired sales (c1,885m), we judge that the company shows no signs of
slowing down significantly. Notably, acquired EBIT in 2022 amounted to cSEK261m, higher
than 2021’s acquired EBIT of cSEK211m owing to acquirees sporting higher margins in 2022.
Organic growth came in solid at c8% (c4%), though it remains to be seen how a likely recession
will impact organic growth in 2023e. EBITA margin declined from c8.4% in 2021 to c7.6% in
2022 due to higher material costs and some projects having fixed prices set before material
prices rose. We suspect margins will normalise once Instalco has worked through its fixed price
backlog. However, sustained cost inflation may threaten the company’s margins longer-term.
Demand for Instalco’s installation services seems to remain strong thus far, with an order
backlog of cSEK8,376m at the end of Q4 2022. However, it remains uncertain how decreasing
new construction activity, on the one hand, and increased demand for services to increase
energy efficiency, on the other hand, will net out in 2023e. Notably, we understand that c12
months following the start of a new construction project, a need for installation services usually
arises. Further, we gather that, once started, construction projects in Scandinavia are usually
finished irrespective of the economic environment. Thus, we might see a potential slowdown
in installation services demand in H2 2023e.
Instalco’s founder and chairman Per Sjöstrand remarked in 2021 that the company could likely
grow to cSEK11bn-12bn of sales in the Nordics. Further, he noted that the company could seek
additional growth through geographic and sector expansion. We will closely monitor how the
company plans to maintain its acquisition-led growth in the coming years and whether its
expansion will prove fruitful. Scaling M&A volume does not seem to constitute a problem.
However, we judge that expanding into new geographies and/or sectors constitutes an initial
risk until a serial acquirer has proven its success in new markets.
29
Instalco: Historical key financials and M&A

SEKm 2015 2016 2017 2018 2019 2020 2021 2022
Net sales 1,369 2,407 3,114 4,414 5,692 7,122 8,890 12,063
Net sales growth (%) 171.3% 75.8% 29.4% 41.8% 28.9% 25.1% 24.8% 35.7%
Organic growth (%) 26.6% 22.0% -1.7% 6.6% 4.0% 5.6% 4.2% 7.9%
Acquired growth (%) 144.7% 53.9% 31.1% 33.6% 24.5% 21.3% 20.6% 26.2%
FX/other growth (%) 0.0% 0.0% 0.0% 1.6% 0.4% -1.8% 0.0% 1.6%
EBITA 49 140 244 334 493 605 748 916
EBITA margin (%) 3.6% 5.8% 7.8% 7.6% 8.7% 8.5% 8.4% 7.6%
Assessed annual sales 552 676 1,031 759 1,460 1,442 1,760 1,141
Assessed annual sales/acq 92 68 57 47 77 80 65 71
Acquired sales* nd 832 1,103 787 1,514 1,399 1,885 1,686
Acquired EBIT* nd 50 153 70 157 138 211 261
EBIT margin (%) na 6.0% 13.9% 8.9% 10.4% 9.9% 11.2% 15.5%
Acquired sales/acq na 83 61 49 80 78 70 105
Acquired EBIT/acq na 5 9 4 8 8 8 16
Net cash deployed on acq 148 325 426 369 560 582 953 1,043
CCs for previous acq 25 19 31 78 94 97 51 173
Purchase consideration** 123 306 394 291 466 484 902 866
Contingent consideration 3 26 88 77 138 186 389 167
Total consideration 126 332 482 368 604 670 1,291 1,033
Contingent/total (%) 3% 8% 18% 21% 23% 28% 30% 16%
Net acq/previous sales (x) 0.3 0.5 0.4 0.5 0.4 0.4 0.5 0.9
EV/Sales initial*** (x) na 0.4 0.4 0.4 0.3 0.3 0.5 0.5
EV/EBIT initial*** (x) na 6.1 2.6 4.1 3.0 3.5 4.3 3.3
EV/Sales total*** (x) na 0.4 0.4 0.5 0.4 0.5 0.7 0.6
EV/EBIT total*** (x) na 6.7 3.2 5.2 3.9 4.9 6.1 4.0
Note *full-year pro forma figures disclosed for acquired companies in the year of acquisition; includes estimates for 2018 -2019
due to insufficient disclosure, **net of acquired cash, ***based on full-year figures in acquisition year
Source: Instalco company filings (financial figures), Redeye Research (table structuring)
30
Instalco: Historical M&A

Instalco: Number of acquisitions and acquired pro forma sales and EBIT (SEKm) per year
2,000 30
1,800
Number of acquisitions (rhs) 25
1,600
1,400
20
1,200
1,000 15
800
10
600
400
5
200
0 0
2015 2016 2017 2018 2019 2020 2021 2022
Instalco: Purchase considerations (SEKm) and paid EV/EBIT multiples (x) over time
2015.5 2016.5 2017.5 2018.5 2019.5 2020.5 2021.5 2022.5
1,400 7
1,200 6
1,000 5
EV/EBIT initial (x)
EV/EBIT total (x)
800 4
600 3
400 2
200 1
0 0
2016 2017 2018 2019 2020 2021 2022
Source: Instalco company filings (financial figures), Redeye Research (chart structuring)
31
Green Landscaping: Owner-operated with strong M&A growth potential
Green Landscaping is a new name in our quarterly update. It was founded in 2009 and listed
on Nasdaq Stockholm in 2018. Investors often compare the company to Instalco and
Fasadgruppen. While there are certain similarities, e.g., Per Sjöstrand being the chairman of all
companies, we believe there are some notable differences.
Green Landscaping maintains and plans outdoor environments, such as park maintenance,
cemetery maintenance, flower planting, and groundwork services, among others. The company
has a strategy to secure long-term contracts for its services, preferably through municipalities,
ensuring predictable cash flows. The market is fragmented, and the company has identified
more than 6,000 potential target companies to acquire within its core markets (the Nordics and
Lithuania). While it sounds like a lot, it represents a pool of opportunities. Importantly, we
understand that Green Landscaping focuses on acquiring the higher quality companies in this
pool. It wants to add the best companies to the group, i.e., the ones with the highest margins,
continuing on their trajectory without needing a turn-around.
The growth strategy derives from both organic growth and acquisitions. Notably, the company
believes that growing quickly through acquisitions carries a lower risk than doing so organically,
as the latter often pressures margins. While we understand that winning contracts to fuel
organic growth is easy, it is hard to do so with decent profitability. One way to avoid competitive
bidding is to be a reliable provider and nurture close customer relationships. Green Landscaping
wants to grow organically in line with the market average of c4-6% per year. The company’s
acquisition model is to pay with both cash and shares to align former owners’ interests with
the remaining shareholders’.
Green Landscaping benchmarks its business units based on profitability to encourage friendly
competition. Another driver for efficiency gains is that the company operates with ‘Policy
Deployment’. This system aims to continuously improve operations, drawing inspiration from
the famous American serial acquirer Danaher Corporation. The system has led to a focus on
quality within Green Landscaping’s operations, i.e., best practices on pricing and cost
reductions. The company has consolidated suppliers, developed a coordinated procurement
process, improved employee productivity, and dismantled unprofitable contracts. The
company's CEO, Johan Nordström, is one of the largest owners with c8% of shares. We believe
he has been instrumental in creating the new strategy for the group since he arrived in 2015.
Green Landscaping has long traded at a discount to its peers, which may have various reasons.
We believe that one reason constitutes Green Landscaping’s large acquisition of Svensk
Markservice in October 2018, representing a turn-around situation. Green Landscaping paid
cSEK398m for the company, sporting cSEK879m in annual sales and adjusted EBITA of
cSEK27m. In 2020, EBIT (no EBITA figure disclosed) had improved to just short of cSEK40m,
while sales had dwindled to cSEK687m. In 2021, net sales amounted to cSEK499m with an
EBIT just short of cSEK21m. Green Landscaping expected synergies realisations of cSEK25m
in 2020.
While these figures seem mixed at first glance, reading the annual reports of Svensk
Markservice and Green Landscaping explains a lot. The company was active across the whole
of Sweden, and parts of it were merged with other companies within Green Landscaping in
2020-2021. Further, Green Landscaping divested one of Svensk Markservice’s business areas
in 2020. The remaining business constitutes its operations in Northern Sweden. With this in
mind, we believe that 2020 presents a better reference year. We note that Green Landscaping
seems to have realised at least part of the expected synergies of the deal.
32
Svensk Markservice: Net sales and EBIT in 2017-2021

1,000 10%
Net sales EBIT EBIT margin
800 8%
600 6%
400 4%
200 2%
0 0%
2017 2018 2019 2020 2021
Source: allabolag.se (financial figures), Redeye Research (chart structuring)
Green Landscaping: The long-term view
Green Landscaping has undergone quite a transformation in the last decade: Following an
internal clean-up to focus on profitable contracts and margin improvement, the company
embarked on its serial acquirer journey. It aims to consolidate the fragmented Nordic markets
for ground maintenance, landscaping, and associated niche services, becoming a full-service
provider. Getting rid of unprofitable customer contracts and restructuring costs depressed the
company’s net sales growth and profitability in the early and mid-2010s. Current CEO Johan
Nordström took the helm of the company in 2015, M&A volume started to ramp up in 2017, and
the company listed its share on Nasdaq First North in 2018.
The company has grown net sales from cSEK797m in 2017 to cSEK4.8bn in 2022, representing
a CAGR of c43.3%. EBITA increased from cSEK30m to cSEK407m over the same period (CAGR
c68.3%), i.e., Green Landscaping’s EBITA margin expanded from c3.8% to c8.5%. Note that the
company partly uses shares to pay for acquisitions and has conducted directed share issues
since its IPO. Shares outstanding have increased from c35.9m at year-end 2018 to c55.4m at
the end of 2022.
Number of acquisitions per year ramped from four in 2017 to 11 in 2022. Further, acquired
annual sales and EBIT increased from cSEK335m and cSEK35m in 2017 to cSEK 1,752m and
cSEK191m in 2022. Net sales per acquiree came in at a median of cSEK94.5m in 2017-2022
(mean cSEK127.9m), and part of the company’s margin expansion over that time derived from
acquiring companies with higher margins than Green Landscaping had. We estimate that the
company paid mean and median EV/EBIT multiples of c7-8x and c4-5x for acquisitions over
the last six years.
The mean EV/EBIT multiple is substantially higher than the median given Svensk Markservice’s
low margins at acquisition in 2018. The company targets an EBITA margin of c8%, i.e., its recent
margin expansion has brought it there. We expect the company to focus on continuing its
acquired growth journey while maintaining or slightly increasing profitability. Notably,
considering that c70% of Green Landscaping’s target market constitutes public sector
customers, we judge that the company is relatively recession resis tant. Importantly, we
understand that its customer contracts are inflation-indexed.
33
Green Landscaping: Historical key financials and M&A

SEKm 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Net sales 614 610 608 695 775 751 681 797 1,176 1,973 2,113 3,139 4,810
Net sales growth (%) nd -1.3% -0.3% 14.2% 11.6% -3.1% -9.3% 17.0% 47.6% 67.8% 7.1% 48.6% 53.2%
Organic growth (%) nd nd nd 11.0% 11.6% -3.1% -10.4% 1.6% 8.0% 1.6% -5.5% 12.4% 7.0%
EBITA nd nd nd nd 4 -4 9 30 18 57 101 232 407
EBITA margin (%) na na na na 0.5% -0.5% 1.3% 3.8% 1.5% 2.9% 4.8% 7.4% 8.5%
Number of acquisitions* 1 0 0 1 1 0 0 4 3 1 7 9 11
Assessed annual sales** 90 na na 27 58 na na 335 882 42 685 820 1,752
Estimated EBIT** nd na na 3 7 na na 35 21 7 85 136 191
Estimated EBIT margin (%) nd na na 12.5% 12.2% na na 10.4% 2.4% 16.6% 12.4% 12.9% 13.9%
Acquired sales/acq 90 na na 27 58 na na 84 294 42 98 91 159
Acquired EBIT/acq na na na 3 7 na na 9 7 7 12 15 17
Net cash deployed on acq 47 0 0 18 20 0 0 76 213 15 364 434 728

CCs for previous acq 0 0 0 0 0 0 0 0 19 8 6 5 90
Purchase consideration*** 57 na na 18 20 na na 126 405 21 407 563 809
Contingent consideration nd na na nd nd na na 40 13 7 111 30 213
Total consideration na na na nd nd na na 166 418 28 517 592 1,022
Contingent/total (%) na na na na na na na 24% 3% 25% 21% 5% 21%
EV/Sales initial***** (x) 0.6 na na 0.7 0.4 na na 0.4 0.5 0.5 0.6 0.7 0.5
EV/EBIT initial***** (x) na na na 5.3 2.9 na na 3.6 19.5 3.0 4.8 4.1 4.2
EV/Sales total***** (x) na na na na na na na 0.5 0.5 0.7 0.8 0.7 0.6
EV/EBIT total***** (x) na na na na na na na 4.8 20.1 4.0 6.1 4.4 5.4
Note: *disclosed acquisitions, **full-year sales and EBIT figures as disclosed by the company or Redeye estimates in years with insufficient disclosure,
***net of acquired cash, including disclosed or estimated payments with shares or other non-cash considerations, ****based on full-year figures
Source: Green Landscaping company filings (financial figures), Redeye Research (table structuring)
34
Green Landscaping: Historical M&A

Green Landscaping: Number of acquisitions and acquired annual sales and EBIT (SEKm) per year
2,000 12
Acquired assessed annual sales
1,800 Acquired EBIT estimate

10
1,600
1,400
8
1,200
1,000 6
800
4
600
400
2
200
0 0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Green Landscaping: Purchase considerations (SEKm) and paid EV/EBIT multiples (x) over time
2016.5 2017.5 2018.5 2019.5 2020.5 2021.5 2022.5
1,200 25

1,000
EV/EBIT initial (x) 20
EV/EBIT total (x)
800
15
600
10
400
5
200
0 0
2017 2018 2019 2020 2021 2022
Source: Green Landscaping company filings (financial figures), Redeye Research (chart structuring)
35
Capital allocation for serial acquirers

They say, “good artists borrow; great artists steal.” We consider ourselves mediocre (on a good
day), so we fully acknowledge that this section was inspired by Mauboussin and Callahan’s
recent paper on capital allocation (read it here).
Serial acquirers often have a large pipeline of potential M&A targets and decent investment
opportunities in organic growth. The time, effort, and capital that different serial acquirers
dedicate to acquisitions versus CAPEX can vary considerably. Most CEOs we talked to usually
say that they dedicate some one-third to two-thirds of their time and efforts to acquisitions,
with the remainder focused on improving existing subsidiaries. From our experience, investors
usually put most of their focus on evaluating serial acquirers’ M&A history while paying little or
moderate attention to how these companies develop their subsidiaries post-acquisition.
Given plenty of acquisition and/or CAPEX opportunities, many investors argue that they should
not distribute dividends or buy back shares if they can deploy capital at attractive rates of return.
Still, especially in Europe, many serial acquirers chose to distribute dividends. This section
discusses capital allocation for serial acquirers, specifically what we think about different uses
of cash and associated shareholder returns.
Uses of cash: Acquisitions, CAPEX, dividends
We see three main uses of cash for serial acquirers:
• Acquisitions: Buying new subsidiaries, either as bolt-on acquisitions to existing

subsidiaries/business units or acquiring new platforms
• CAPEX: Investing in both tangible and intangible assets to generate organic growth;
for intangibles, we use intangible investments as disclosed in companies’ investing
cash flows, i.e., we do not make assumptions about what percentage of sales &
marketing and R&D expenses might constitute intangible investments
• Dividends/share buybacks: Returning cash to shareholders through either dividends
or repurchasing shares
Acquisitions and CAPEX represent internal investments to compound capital, while dividends
and share buybacks constitute cash returns to shareholders. We have compiled sources and
uses of cash in 2017-2022 (or the five latest fiscal years plus LTM numbers instead of 2022 for
companies with split fiscal years) for companies included in the Redeye serial acquirers index
(Redeye SA index) below (FactSet). As these companies have been net share issuers over time,
we have not included buybacks in our analysis of uses of cash (see net share issuance in
sources of cash section).
Specifically, companies in the Redeye SA index deployed cSEK55.2bn or c69% of cumulative

uses of cash into acquisitions. Further, these companies featured cumulative CAPEX of
cSEK9.9bn (c12%) and cumulative dividends of cSEK14.5bn (c18%). Note that given their recent
listings, Fasadgruppen’s and Norva24’s public financials start in 2018 and 2020, respectively.
36
Redeye serial acquirers index: Uses of cash

Redeye SA index: Uses of cash (SEKm) Redeye SA index: Cumulative uses of cash 2017-2022 (%)
25,000
Acquisitions CAPEX (tangibles and intangibles) Dividends
3,686 3,438
20,000
1,880 2,405
18%
15,000
12%
10,000
2,345 69%
1,376 16,715 16,452
1,775 1,706
1,856 1,615
938
5,000 1,354
6,403 6,082
5,306
4,273
0 Acquisitions CAPEX (tangibles and intangibles) Dividends

2017 2018 2019 2020 2021 2022
Note: Full-year results for 2017-2022 or five latest fiscal years and LTM numbers for companies with split fiscal years
Source: FactSet (financial figures), Redeye Research (chart structuring)
Acquisitions: The bread and butter
We view acquisitions as the serial acquirer’s bread and butter. Serial acquirers usually buy
smaller private companies at relatively low multiples, typically c5-10x EV/EBIT. Given their
status as ‘preferred buyers’, they can acquire private companies at lower multiples than the
highest bidder would pay in a competitive auction. Serial acquirers then redeploy operating cash
flows (OCF) generated by existing and new subsidiaries into additional acquisitions. As M&A is
serial acquirers’ core competence, we view acquisitions as an extension of their CAPEX
spending. Instead of deploying all cash on internal investments to generate growth, serial
acquirers replace growth CAPEX with acquisitions, at least partly.
Notably, serial acquirers often buy smaller companies in specific niches or industries. In many
cases, e.g., VMS, it is cheaper and faster to buy such a small company than to invest in
organically developing a competing product and taking market share. We judge there are two
essential components in a serial acquirer’s M&A strategy: valuation discipline and buying
companies in industries or niches close to their current expertise. Further, a cultural fit between
acquirer and acquiree is essential to ensure solid operational development post-acquisition.
There seems to exist some variation in how much serial acquirers emphasise the importance
of ‘industrial logic’ in their acquisitions. Most quality acquirers only conduct M&A in their home
turf or related industries and niches. Still, some heavily emphasise how acquisitions need to
make sense from a strategic and industrial perspective. In contrast, others seemingly
emphasise the financial logic of a deal, i.e., buying good companies at cheap or reasonable
valuations. We judge that it is somewhat unclear whether this difference among quality
acquirers only exists in how they think and talk about acquisitions or whether it makes a
difference in which firms they purchase. Specifically, even though emphasis varies among
quality acquirers, they usually focus on specific niches or industries, i.e., there seems to always
be a considerable amount of ‘industrial logic’ in their acquisitions.
Capital deployed on acquisitions skyrocketed from cSEK4.3bn-6.4bn (c57-67% of uses of cash)

per year in 2017-2020 to cSEK16.7bn (c75%) in 2021 and cSEK16.5bn (c74%) in 2022. We
believe the increase in 2021 reflected the bullish capital market sentiment that year, enabling
serial acquirers to source more cash from capital markets to deploy on acquisitions (see
37
sources of cash section). Surprisingly, 2022 did not feature a slowdown despite more
pessimistic capital markets.
The total number of acquisitions that companies in the Redeye SA index made increased from
87 in 2017 to 134 in 2022. Similarly, the median number of acquisitions per year and constituent
increased from four in 2017 to seven in 2022. The mean number of acquisitions per year and
constituent increased from 5.8 in 2017 to 8.9 in 2022. Mean number of acquisitions exceeds
the median, given that some prolific acquirers pull up the average. For example, Instalco and
Fasadgruppen completed 16 and 20 acquisitions in 2022, respectively. Total number of
acquisitions in 2022 has moderated somewhat compared to its peak in 2021. Total number of
acquisitions by surveyed companies peaked in 2021 at 153, with a median of seven and mean
of 10.2 acquisitions per constituent.
Redeye serial acquirers index: Number of acquisitions per year

16 180
Median
Sum (rhs) 160
14
25th percentile
75th percentile 140
12
Mean
120
10
100
8
80
6
60
4
40
2 20
0 0
2017 2018 2019 2020 2021 2022/LTM
Note: Full-year results for 2017-2022 or five latest fiscal years and LTM figures for companies with split fiscal
years
Source: Company reports (number of acquisitions), Redeye Research (chart structuring)
CAPEX: Different strokes for different folks
There seems to be some discrepancy in how much different serial acquirers emphasise the
importance of internal growth investments. Some companies see it as a central pillar to develop
existing subsidiaries and drive organic growth. Others seem to view it as a secondary issue to
their main focus: acquisitions. For serial acquirers, we view acquisitions and CAPEX as equal
and believe that they (or all companies, for that matter) should pursue the investments with the
highest risk-adjusted returns. Given serial acquirers’ M&A expertise, we judge that their
investments in additional M&A carry the same or even a lower risk profile than CAPEX.
Conversely, for companies that do not feature distinguished M&A expertise, we believe that
CAPEX investments have a lower risk than M&A.
Importantly, we distinguish two kinds of CAPEX: Maintenance CAPEX and growth CAPEX.
Maintenance CAPEX represents investments required to maintain a company’s present assets
and productive capacity. In contrast, growth CAPEX seeks to lay the groundwork for expansion.
We judge that serial acquirers, especially niche acquirers, should usually prefer M&A over
growth CAPEX.
38
Serial acquirers often buy small- and mid-sized profitable companies in relatively small niches.
Acquirees usually have an entrenched position in their niche, giving them pricing power. Trying
to expand into these niches organically may be irrational, given that the required upfront
investment exceeds the present value of gaining a foothold. Thus, acquiring small niche
companies provides a higher IRR for companies that want to expand into these small niche
markets. Trying to grow organically through growth CAPEX while existing players in a niche do
not reduce capacity may lead to excess supply and, thus, pricing pressure and declining
profitability (To read more about the interaction of capital investments and investment returns,
we suggest you read Edward Chancellor’s ‘Capital Returns’). We believe this point is essential
to consider for companies in cyclical industries where overexpansion during upswings can have
dire consequences in eventual downturns.
CAPEX in the Redeye SA index was relatively stable in 2017-2020, coming in at cSEK0.9bn-
1.7bn or c12-18% of uses of cash. In relative terms, CAPEX declined to c8% of uses of cash in
2021 and c11% in 2022, even if increasing in absolute terms to cSEK1.9bn and cSEK2.4bn,
respectively. We judge this indicates that serial acquirers maintained an average level of CAPEX
in 2021-2022 while ramping up M&A activity. In contrast to CAPEX as a percentage of uses of
cash, CAPEX divided by net sales stayed relatively constant over the same period at c2%.
Dividends/share buybacks: The hot potato
Many investors choose to buy stock in serial acquirers with the thesis that they can redeploy
their free cash flow into new acquisitions over the foreseeable future, thus compounding capital
at attractive rates. Still, 12 of 15 companies in the Redeye SA index distribute a dividend.
Dividends and buybacks attract considerably different opinions among investors, with
European ones usually preferring at least a small dividend. In contrast, North American
investors tend to prefer companies reinvesting as much money as possible and/or buying back
shares.
We prefer serial acquirers not to distribute dividends (or buy back shares) if they have solid M&A
pipelines and internal investment opportunities. However, there are reasonable arguments for
both sides. Notably, serial acquirers might choose to distribute dividends or repurchase shares
if they:
• Have maximised their organisational M&A capacity without using all excess cash
• Want to enforce discipline on themselves, i.e., cash available for acquisitions and
CAPEX is limited, and thus they need to constantly scrutinise which opportunities
provide the highest returns
• Want to prove their strong cash flows with the ability to return cash to shareholders
• Respond to shareholders’ preference for dividends or repurchases, potentially
garnering a higher valuation for the share
We judge that it is acceptable for serial acquirers to distribute dividends (or repurchase shares)
if they have excess cash that they cannot use for acquisitions or CAPEX. Importantly,
distributing excess cash to shareholders ensures that management does not deploy it into
projects with insufficient returns for ‘empire-building’ purposes. However, depending on an
investor’s country of domicile, dividends may be taxed relatively heavily. Further, we judge that
serial acquirers using share issues to finance their M&A agendas should not distribute
dividends or buy back shares. We believe that distributing a dividend just to take in even more
money through a share issue later would create frictional costs but not increase shareholder
value. Investment bankers and other intermediaries that receive fees when shuffling around
money this way are the only entities that benefit in such a scenario.
Importantly, dynamically allocating excess cash may be more prudent in the form of buybacks.
Specifically, shareholders usually expect companies at least to pay the same dividend in any
given year as they did in the prior years(s). Therefore, companies go to significant lengths to
39
maintain their dividends, practically representing a fixed commitment. In contrast, shareholders

usually do not react to a company lowering or increasing the amount of buybacks it conducts
in a given year. Thus, we judge that buybacks constitute a superior form of returning excess
cash to shareholders without committing to a payout that might constrain acquisitions and
CAPEX in times of ample opportunities. However, buybacks might not constitute a rational way
to return money to shareholders if a company’s stock price significantly exceeds intrinsic value
or if the terminal value of its operations is very uncertain.
Interestingly, while most executives regard their company’s share as undervalued, few serial
acquirers use share buybacks. Given their strict valuation discipline in M&A deals, one would
believe that they have a relatively good notion of the intrinsic value of their company. Still, they
seemingly do not put their money where their mouths are. Notably, the median CEO at
companies in the Redeye SA index owned c6.4x their annual base salary in company shares.
Thus, we judge that they have skin in the game, and their interests should align with
shareholders.
Lastly, we believe one should always compare buybacks to equity-based compensation of

executives and other employees. To reduce share count, the number of repurchased shares
needs to exceed dilution from equity-based compensation. Buying back shares merely to offset
equity-based compensation is a thinly veiled way of paying executives and employees more
while disguising it as items that do not affect operating and free cash flow.
Redeye serial acquirers index: CEO base salary and share ownership
2021 base Shares Value Value/base Base salary/ Base salary/ Base salary/
Company
salary (SEKm) owned (SEKm) salary (x) 2021 sales (%) 2021 EBIT (%) EV (%)
Volati 3.6 2,800 0.3 0.1 0.06% 0.60% 0.04%
Lagercrantz 6.0 2,434,348 285.1 47.2 0.11% 0.79% 0.02%
Indutrade 9.6 48,172 10.8 1.1 0.04% 0.34% 0.01%
Addlife* 5.2 10,500 1.2 0.2 0.06% 0.51% 0.03%
Addtech 6.4 249,396 46.0 7.2 0.05% 0.44% 0.01%
Lifco 22.5 693,500 144.5 6.4 0.13% 0.70% 0.02%
Fasadgruppen 2.1 673,080 70.1 33.3 0.08% 1.00% 0.03%
Bergman & Beving 4.1 314,749 37.5 9.2 0.09% 1.40% 0.08%
NCAB 3.2 75,770 4.1 1.3 0.10% 0.82% 0.02%
Green Landscaping 2.3 3,672,997 327.6 142.4 0.07% 1.61% 0.03%
Instalco 3.2 1,746,980 81.1 25.0 0.04% 0.50% 0.03%
Vitec 3.8 35,000 16.2 4.3 0.24% 1.27% 0.02%
Sdiptech** 3.9 402,168 102.9 26.5 0.14% 1.06% 0.03%
Norva24 4.4 798,750 26.1 6.0 0.22% 1.96% 0.06%
Beijer Alma 4.2 24,200 4.8 1.1 0.08% 0.52% 0.03%
Mean 5.6 77.2 20.8 0.10% 0.90% 0.03%
Median 4.1 37.5 6.4 0.08% 0.79% 0.03%
th
25 percentile 3.4 7.8 1.2 0.06% 0.52% 0.02%
th
75 percentile 5.6 92.0 25.8 0.12% 1.16% 0.03%
Cumulative 84.4 1158.5 13.7 0.08% 0.64% 0.02%
Note: *Addlife: 2021 salary for prior CEO Kristina Willgård, share ownership of current CEO Fredrik Dalborg **Sdiptech: 401,228 B shares
and 940 preference shares
Source: Company reports (base salaries), Holdings (share ownership, retrieved 25 February 2023), Redeye Research
(chart structuring)
40
Sources of cash: OCF, share issues, debt
We see three primary sources of cash for serial acquirers:
• OCF: Cash from operations after changes in working capital

• Share issues: Issuing new shares to investors, often in the form of initial public
offerings (IPOs) or directed share issues
• Debt: Borrowing money, usually from banks or by issuing bonds
OCF is the only internal source of cash, while share issues and debt represent sourcing cash
from external parties. Asset sales are an alternative internal source of cash, though rarely seen
in significant amounts for serial acquirers.
We have compiled sources of cash in 2017-2022 (or the five latest fiscal years and LTM figures
for companies with split financial years) for companies included in the Redeye SA index below.
Specifically, companies in the Redeye SA index posted cSEK 58.8bn or c66% of cumulative
sources of cash in net OCF. Further, these companies sourced a cumulative cSEK7.2bn (c8%)
from net share issues and a cumulative cSEK22.9bn (c26%) from net debt issues.
Redeye serial acquirers index: Sources of cash

Redeye SA index: Sources of cash (SEKm) Redeye SA index: Cumulative sources of cash 2017-2022 (%)
30,000
Net operating cash flow Net share issues Net debt issues
25,000
20,000 9,017
8,940
26%
15,000
1,512 1,847
2,519
2,249 8%
10,000
437
66%
2,452 1,690
13,290 13,218
403 12,125
480
5,000 8,928
5,357 5,895
0
-1,495
-5,000 Net operating cash flow Net share issues Net debt issues
2017 2018 2019 2020 2021 2022
Note: Full-year results for 2017-2022 or five latest fiscal years and LTM figures for companies with split fiscal years
Operating cash flow: The knife to the bread and butter
We view OCF as the knife with which serial acquirers slice their bread and spread butter. The
whole idea of serial acquirers (for us, at least) evolves around buying businesses with strong
cash flows that they can redeploy to conduct additional acquisitions. While they can
supplement a growing OCF with increasing debt, leverage needs support from s olid cash flows
so lenders can rest assured that the borrower can service and eventually pay back loans.
By redeploying strong and growing OCF into acquisitions, serial acquirers can compound their
capital at premium rates at relatively low risk, presuming that they choose acquisition targets
carefully. A key to successfully using OCF for growth investments is a strict focus on returns
by management, given that they do not need to persuade external stakeholders to provide
capital for a particular investment.
41
Net OCF in the Redeye SA index increased from cSEK5.4bn in 2017 to cSEK13.3bn in 2020,
representing a CAGR of c35%. Net OCF declined somewhat to cSEK12.1bn in 2021, though we
judge increased working capital due to inventory hoarding in the face of supply chain issues
drove this decrease. Working capital started to normalise towards the end of 2022, with net
OCF recovering somewhat to cSEK13.2bn in 2022. We expect further decreases in net working
capital in 2023e which should affect net OCF positively.
Notably, in 2017-2022, cumulative uses of cash exceeded net OCF for companies in the Redeye
SA index in all years except 2020. Cumulatively, acquisitions, CAPEX, and dividends amounted
to c94%, c17%, and c25% of net OCF, respectively. Therefore, serial acquirers needed to
supplement net OCF with other sources of cash to fund their uses of cash.
Redeye serial acquirers index: Uses of cash in relation to net OCF

Redeye SA index: Uses of cash (% of net OCF) Redeye SA index: Cumulative sources of cash 2017-2022 (% of net OCF)
200%
Acquisitions CAPEX (tangibles and intangibles) Dividends

175%
30%
26%
150%
16%
33% 18%
125%
31%
18%
26%
100%
23% 19%
75%
138%
10% 124%
50% 99% 12%
72% 72%
25% 46%
0%
2017 2018 2019 2020 2021 2022
Note: Full-year results for 2017-2021 or five latest fiscal years for companies with split fiscal years
Share issues: A tale of opportunism and shareholder base
From a strictly rational perspective, a company should repurchase shares when its stock is
trading significantly below intrinsic value and issue shares when it is trading significantly above
intrinsic value.
As investors, we prefer companies not to issue shares. Specifically, the owner of a share
presumably believes that it is undervalued. Therefore, an owner would not want a company to
issue shares if the company does not have an acute need for an equity capital injection. Further,
conducting new share issues at a price exceeding intrinsic value will result in investors
purchasing overvalued stock that could experience considerable multiple compression. If
potential multiple compression materialises, these investors might be quick to sell and, thus,
likely do not constitute long-term owners.
Companies in the Redeye SA index usually raise equity through IPOs or directed share issues.
If a company needs or wants to raise equity capital, we prefer these avenues over rights issues.
Rights issues usually come with considerable discounts to entice shareholders to subscribe
but severely harm the issuer’s stock price.
Notably, cumulative net share issues amounted to cSEK400m-500m per year in 2017-2019 for
companies included in the Redeye SA index. In the glory days of 2020 and 2021, net share
issues soared to cSEK1.5bn and cSEK2.5bn, respectively. With equity capital markets in
42
hibernation, we judge that share issues will likely moderate in the coming years. At the same
time, increasing interest rates may motivate some serial acquirers to issue equity to reduce
leverage. We judge that quality acquirers still have ready access to equity capital. In contrast,
others that overextended themselves when money was practically free in 2020-2021 will likely
face difficulties when trying to tap equity capital markets. Indeed, net share issues amounted
to cSEK1.8bn in 2022 for companies in the Redeye SA index, indicating continued access to
equity capital markets.
Debt: Prudent leverage can amplify ROE
Most serial acquirers have relatively stable cash flows, though the degree of cyclicality varies
considerably based on industry exposure. For non-cyclical serial acquirers, we believe that a
net debt/EBITDA of c2.0-3.0x represents prudent leverage. We define prudent leverage as easily
serviceable with OCF while still enhancing ROE to a considerable degree (presuming that cost
of debt is lower than cost of equity). For cyclical serial acquirers, we prefer seeing leverage in
the c0.5-2.0x net debt/EBITDA range (using a normalised EBITDA over a business cycle).
The median net debt/EBITDA ratio for companies in the Redeye SA index ranged from c1.2-
2.2x in 2017-2022. Median net debt/EBITDA bottomed at c1.2x in 2020 when many serial
acquirers reduced debt, given considerable economic uncertainty associated with the COVID-
19 pandemic. Indeed, 2020 represents the only year in our survey period when net debt issues
for companies in the Redeye SA index were negative. As economic fears subsided and interest
rates cratered, many serial acquirers increased leverage, with median net debt/EBITDA
increasing to c1.8x in 2021 and c2.2x in 2022.
Notably, net debt issues for companies in the Redeye SA index amounted to cSEK8.9bn in 2021
and cSEK9.0bn in 2022, considerably exceeding cumulative ned debt issues of cSEK4.9bn in
2017-2020. Overall, leverage seems roughly stable over time, subject to short-term fluctuations,
as debt in absolute terms grows roughly in line with EBITDA. Leverage might moderate in
2023e, considering a likely imminent recession, higher interest rates, and many serial acquirers
having become somewhat less trigger happy on the M&A side of things recently.
Redeye serial acquirers index: Net debt/EBITDA 2017-2022 (x)

3.5
Median Cumulative 25th percentile 75th percentile Mean

3.0
2.5
2.0
1.5
1.0
0.5
0.0
2017 2018 2019 2020 2021
years
43
ROIC: Higher than WACC please
To create economic value, a company’s return on invested capital (ROIC) must exceed its
weighted-average cost of capital (WACC). However, early-stage companies may accept a ROIC
below their WACC now to generate future growth and earn a ROIC exceeding their WACC down
the line. Generally, firms that grow invested capital faster than their ROIC require external capital
injections to sustain their growth.
In 2017-2021, the median ROIC for companies in the Redeye SA index ranged from c12-15%
(FactSet). If we assume that median WACC of these companies came in at c8-10%, they
created economic value as a group. However, ROIC varied considerably among constituents.
The 25th percentile of companies in the Redeye SA index posted ROICs of c8-10% in 2017-2022,
i.e., right around our estimated WACC. In contrast, the 75 th percentile of ROICs amounted to
c16-20% during this period, approximately double our estimated WACC for the group. ROIC
seems to have been trending downwards since 2020. A caveat here is that an increas ing rate
of acquisitions will depress ROIC in the short term. Specifically, invested capital increases
immediately upon acquisition while associated earnings emerge in the companies profit with a
lag. Thus, an accelerating increase in invested capital lowers ROIC temporarily.
Redeye serial acquirers index: ROIC 2017-2022 (%)

25%
Median 25th percentile 75th percentile Mean
20%
15%
10%
5%
0%
2017 2018 2019 2020 2021 2022
years
44
Redeye M&A classification framework

Redeye M&A classification framework
We have sought to develop our own classification system of M&A-driven business types to
improve the understanding among investors, companies, and other stakeholders such as the
financial media. We associate several crucial aspects with serial acquirers, differentiating them
from other M&A-driven businesses. We judge that all serial acquirers:
• Have an infinite investment horizon

• Feature primarily internal deal sourcing and due diligence
• Have a decentralised organisational structure with limited or no integration of
subsidiaries
• Allocate the majority of free cash flow (FCF) to additional acquisitions and internal
reinvestment that pass the serial acquirer’s hurdle rate/investment criteria
We arrive at three sub-categories of serial acquirers: Holding companies, niche acquirers, and
roll-ups. Further, we judge that other common M&A-driven business types that investors
frequently mistake as serial acquirers comprise private equity approaches and strategic
acquirers. Admittedly, the exact borders between categories are somewhat arbitrary. However,
we aim to establish a more explicit classification to avoid confusion among investors when
discussing different kinds of M&A-driven business models.
Redeye M&A classification framework: Different strokes for different folks

Serial acquirers Other M&A-driven firms
Features Holding companies Niche acquirers Roll-ups Private equity Strategic acquirers
Investment horizon Forever Forever Forever Short- to mid-term Mid- to long-term
Often a secondary issue, change if Limited to extensive changes upon

Continuity of culture No change No change or limited integration Moderate integration
necessary integration
Internal due diligence, sometimes

Due diligence Internal Internal due diligence or brokers Long process, often involving brokers Long process, often involving brokers
through brokers
Internal/relationships or through
Search process Internal/relationships Internal or through brokers Internal or through brokers Internal
brokers
Governance Decentralised Decentralised Usually decentralised Centralised Centralised
Autonomous operations, reporting to Limited integration, reporting to HQ, Moderate integration, reporting to Operational/organisational change to Integration into acquirers'
Post transaction
HQ shared operational excellence HQ, scale-driven synergies realise value and prepare exit organisation
Variable, often mix of FCF, equity, and

Financing FCF and low leverage FCF and low/medium leverage FCF and medium/high leverage Primarily debt, high leverage
low/moderate leverage
Cash and majority interest, Cash and sometimes equity/earn-
Deal structure Cash and majority/minority interest Variable Cash and/or equity
sometimes earn-outs outs
FCF back to headquarters or internal FCF back to headquarters or internal

Capital allocation FCF back to headquarters FCF back to headquarters Internal (re-)investment
reinvestment reinvestment
Variable differentiation, portfolio of Differentiated products, clustering of Variable differentiation, portfolio of Differentiated products or assets of
Product differentiation Commodity-like products
unrelated businesses subsidiaries unrelated businesses acquiree strengthen acquirer
TAM constraint Very low or non-existent Medium High Low to medium Medium to high
Resource and process

High Medium Low Medium to high Low to medium
constraint
Variable size and number of Multiple industries of larger size, Often a single, large industry and/or Often single or few industries, Acquiree's TAM matches or
TAM Definition
industries, often multinational often multinational single country possibly multinational complements acquirer's TAM
Can easily expand TAM, buy where Compromise between TAM Scaling deal volume quickly to Flip acquiree for higher price after Operational synergies or
Opportunities
valuations are lowest expansion and scaling deal volume consolidate niche operational improvement diversification
Overpaying, not delegating bolt-on Overpaying when running into TAM High leverage, operational risk may
Harder to scale deal volume, larger Strategic rationale for M&A does not
Risks M&A leads to larger deals and higher constraints, (geographic) di- not work out, short-term window
deals at higher multiples over time work out as planned
valuations worsification dressing
Scaling M&A resources and Market share, opportunistic TAM Market share, track record and Progress of operational changes, Realisation of synergies or beneficial
Monitor
processes expansion, small M&A delegation feasibility of international expansion access to financing, exit opportunity effects of diversification
Constellation Software, Vitec, Judges

Berkshire Hathaway, Investor AB, Instalco, NCAB, Fasadgruppen, Green KKR, EQT, Carlyle Group, Blackstone, Embracer, Hexatronic, Surgical
Examples Scientific, Addtech, Lifco,
Bolloré, Exor, Latour Landscaping, Norva24 Thoma Bravo Science, Fortnox, Carasent
Lagercrantz, Sdiptech, Röko, B&B
Source: Redeye Research, with inspiration from REQ capital, Exploring Content Substack, and Scott Management LP
45
What makes serial acquirers unique?
We judge that serial acquirers have two key advantages that differentiate them from other M&A-
driven business models:
1. They are perpetual owners, not trying to flip acquirees relatively quickly. This long-
term orientation provides a key advantage over private equity, we judge. Indeed, often
private equity could be willing to pay a higher valuation for businesses than serial
acquirers. Nevertheless, owners frequently choose to sell to serial acquirers because
they are concerned about their company, employees, and legacy.
2. Serial acquirers tend to have a hands-off approach. Thus, operators continue to run
the company even after acquisitions, providing high autonomy while enabling them to
monetise (part of) their equity. Heavy interference from private equity buyers or
strategic acquirers may estrange previous employees, who often constitute an
essential part of a company’s competitive advantage. Key employees exiting shortly
after an acquisition can be detrimental even when buying at a low valuation.
Many serial acquirers have experienced considerable multiple expansion over the last ten years.
Notably, serial acquirers can usually buy companies at a substantially lower valuation than their
own shares trade at. This difference offers an opportunity for multiple arbitrage when paying
with own shares as a currency. Even without using equity in an M&A deal, earnings from new
acquirees rerate from the acquisition multiple to the serial acquirer’s trading multiple.
Buying a company for five times earnings is great if your share keeps trading at a substantially
higher valuation. However, we believe investors are generally too focused on the multiples and
the arbitrage. For example, buying a company for five times earnings equals a 20% return
(100/5) on the investment. The ability to consistently buy qualitative companies for low prices
and get high returns on the capital is, in our view, the fundamental financial reason behind the
success of many serial acquirers.
46
Market commentary and valuations

Sometimes it is better to be lucky than good. In our Q3 update, we remarked how valuations
had declined to more reasonable or attractive levels for many serial acquirers during 2022.
Since then, the index has increased by approximately 17% in three months. On an aggregate
level, we judge that valuations are still in line with their historical levels (c15x EV/EBITDA).
However, a key question for stock returns will likely constitute margin preservation in 2023e.
Specifically, we will closely track how serial acquirers who operate in cyclical industries can
preserve their margins and profit in what will likely be a more depressed economic environment.
Otherwise, stocks might decline despite valuation multiples staying approximately constant.
Valuations have returned to more normal levels
Following broad declines and multiple compression in Q1-Q3 2022, sentiment turned in late Q3
and early Q4 2022. The Redeye SA index bottomed at c340 in late September 2022 (base 26
February 2018 = 100). In line with a generally improving market sentiment, the Redeye SA index
is up c32% since then. During the same time, the broader OMXSPI index increased by c22%.
The average LTM EV/EBITDA multiple for companies in the Redeye SA index bottomed at c13x
in late September, expanding to c15x now. Over the last five years, the average mean LTM
EV/EBITDA multiple for the index was c17.1x, while the median amounted to c14.5x. Notably,
the mean is pulled upwards by the ebullient valuation multiples of 2020-2021. We consider the
index as a whole to trade in line with historical valuations right now. However, mean reversion
works both ways, i.e., we might not have seen the bottom in valuation multiples just yet. Still,
we believe the risk/reward in many serial acquirers has improved markedly with the general
decline of 2022. While some short-term multiple compression risk might persist in 2023e, long -
term valuation risk is likely not higher today than its historical average.
Serial acquirers: EV/EBITDA multiples over time

On the next page, we provide an overview of select serial acquirers’ current and historical
valuation multiples. We have sourced data from FactSet. While we believe that EBITA is the
best measure to compare different serial acquirers given their considerable acquisition-related
amortisation charges, historical data is hard to access or incomplete in many cases. Therefore,
we use EV/EBITA multiples to compare serial acquirers’ current valuations, but EV/EBITDA
multiples to illustrate the valuations they traded at over time. Notably, we believe the most
important thing is to track valuation metrics over time, with the specific metric(s) used
constituting a secondary issue.
47
Niche acquirers: EV/LTM EBITDA multiples over time
50
LAGR.B-SE SDIP.B-SE ADDT.B-SE LIFCO.B-SE INDT-SE VOLO-SE BEIA.B-SE
BERG.B-SE OEM.B-SE XANO.B-SE BUFAB-SE VIT.B-SE ALIF.B-SE

45
40
35
30
25
20
15
10
0
Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22
Source: FactSet (retrieved 25 February 2023), Redeye Research
Roll-ups: EV/LTM EBITDA multiples over time

90
INSTAL-SE GREEN-SE FG-SE NORVA-SE NCAB-SE
80
70
60
50
40
30
20
10
0
Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22
48
Peer table: Redeye SA index

Niche acquirers EV EV/Sales EV/EBITA Sales Growth EBITA margin
Company (SEKm) 2022(e) 2023e 2024e 2022(e) 2023e 2024e 2022(e) 2023e 2024e 2022(e) 2023e 2024e
Lifco 102,748 4.8 4.5 4.3 22.2 22.3 21.0 23% 3% 3% 21% 20% 20%
Indutrade 90,375 3.3 3.1 2.9 22.0 21.3 19.6 24% 7% 4% 15% 14% 15%
Addtech 54,655 3.0 2.8 2.6 22.7 22.4 20.5 30% 3% 5% 13% 13% 13%
Lagercrantz 26,832 3.7 3.4 3.2 22.4 21.4 20.7 31% 7% 5% 17% 16% 16%
Addlife 19,124 2.1 2.0 1.8 16.3 17.2 15.1 14% 3% 5% 13% 11% 12%
Vitec 18,421 9.3 7.6 6.7 30.5 24.2 20.7 26% 24% 15% 31% 31% 32%
Sdiptech 13,286 3.8 3.1 2.8 19.5 15.8 13.7 29% 20% 10% 19% 20% 20%
Beijer Alma 14,059 2.3 2.2 2.1 16.5 15.9 14.6 12% 3% 5% 14% 14% 15%
Volati 9,985 1.3 1.2 1.1 13.8 13.1 11.5 23% 3% 4% 9% 9% 10%
Bergman & Beving 5,090 1.1 1.0 1.0 13.8 12.3 11.3 4% 2% 2% 8% 8% 8%
Mean 35,457 3.5 3.1 2.8 20.0 18.6 16.9 22% 7% 6% 16% 16% 16%
Median 18,772 3.2 2.9 2.7 20.7 19.2 17.4 24% 3% 5% 15% 14% 15%
Roll-ups EV EV/Sales EV/EBITA Sales Growth EBITA margin

Company (SEKm) 2022(e) 2023e 2024e 2022(e) 2023e 2024e 2022(e) 2023e 2024e 2022(e) 2023e 2024e
Norva24 7,047 2.8 2.3 2.1 25.6 18.3 15.7 14% 20% 6% 11% 13% 13%
NCAB 14,734 1.2 1.1 1.0 16.2 14.6 12.6 36% 7% 3% 8% 8% 8%
Instalco 10,700 2.4 2.4 2.2 16.9 17.4 16.0 38% 1% 6% 14% 14% 14%
Green Landscaping 6,834 1.4 1.1 1.0 16.8 12.4 11.4 53% 21% 4% 8% 9% 9%
Fasadgruppen 6,445 1.4 1.2 1.1 14.9 12.4 11.4 70% 16% 3% 9% 10% 10%
Mean 9,152 1.9 1.6 1.5 18.1 15.0 13.4 42% 13% 4% 10% 11% 11%
Median 7,047 1.4 1.2 1.1 16.8 14.6 12.6 38% 16% 4% 9% 10% 10%
We have also constructed an equal-weighted index of companies listed in the peer table
displayed above (Redeye SA index). LTM, this index is down c3%, in line with the broader
OMXSPI index (c-3%) (25 February 2022 = 100 for both indexes). However, over the past five
years (base 26 February 2018), the Redeye SA index has increased by c346%. In contrast,
OMXSPI posted an increase of c46% over the same period. The Redeye SA index’s EV/LTM
EBITDA multiple expanded from on average c13x in Q4 2019-Q1 2020 to a peak of c33x in H2
2021. However, following the index's decline in 2022, its median EV/LTM EBITDA multiple has
returned to c15x. Note that the Redeye SA index does not represent an exhaustive list of
Swedish serial acquirers. We choose constituents based on a number of factors, and
constituents might change in the future.
Redeye SA index: Price development and EV/EBITDA multiple over time

700 35
Redeye SA index OMXSPI Redeye SA index median EV/LTM EBITDA (x, rhs)
600 30
500 25
400 20
300 15
200 10
100 5
0 0
Feb-18 Aug-18 Feb-19 Aug-19 Feb-20 Aug-20 Feb-21 Aug-21 Feb-22 Aug-22
26 February 2018 = 100 for both indexes

49
M&A lessons from hell

We have read Robert F. Bruner’s book ‘Deals from Hell: M&A Lessons That Rise Above the
Ashes’ (John Wiley & Sons Inc., 2005). In the book, Professor Bruner summarises his findings
from M&A-related literature he surveyed (mostly publications from the 1960s to early 2000s).
The book also includes numerous case studies of successful and failed M&A deals. After
reading the case studies, we judge that the book’s lessons mainly apply to strategic acquirers
(see our M&A classification framework on page 45).
Specifically, many case studies featured companies that did not have M&A at the core of their
strategy. Case studies usually constituted large deals for the acquirer, making a potential failure
in post-acquisition integration and management a considerable hazard to shareholder returns.
Therefore, we judge that the dominance of strategic acquisitions in the data that Bruner
analysed skewed the results not to make them applicable to true serial acquirers.
Below, we have summarised his findings and applied the criteria he laid out in his book on
Surgical Science’s (a strategic acquirer) acquisition of Simbionix. Specifically, we judge that the
deal featured positive attributes in 10 of 17 categories and negative traits in two of 17
categories. We believe the remaining five categories are either neutral or skew neutral.
Notably, this characterisation only represents Bruner’s findings based on the literature he
surveyed and does not necessarily represent the final word on all aspects used to assess
whether a deal will lead to higher or lower returns. For example, we would argue that many
serial acquirers have proven that opportunistic deal-making can work well. Indeed, Surgical
Science’s Simbionix acquisition was arguably opportunistic, considering 3D System’s imminent
strategic review enabled the deal.
Surgical Science - Simbionix: Merits of the deal

Likely increases buyer's return Likely lowers buyer's return SUS-Simbionix Higher/lower
Strategic: Strengthen RAS offering, broaden product
Motivation is strategic Motivation is opportunistic Higher
offering
Reasonable/cheap valuation Buying for momentum growth and glamour Cheap (relative to SUS' own valuation) Higher
Acquiree operates in same or related niche/industry Acquiree operates in unrelated niche/industry Highly related and complementary Higher
Credible synergies: Complete product offering,

Synergies are credible Synergies are not credible Higher
broader customer base, among others
Cash specifically raised for transaction through
Deal intended to use excess cash profitably Deal intended just to use excess cash Higher
directed share issue
Negotiated deal to buy private company Auction to buy public company Negotiated deal with 3D Systems (NYSE:DDD) Neutral
Informed crossing borders to obtain special Informed: Broaden customer base and sales
Naive crossing of borders Higher
advantage (products, geographies)
Hostile takeover Negotiation with resistant acquiree Negotiation with willing acquiree Neutral
Hot market, but enabled SUS to benefit from multiple

Acquisition in 'cold' market Acquisition in 'hot' market Neutral
arbitrage
Payment with cash Payment with stock Payment with cash Higher
Deal holds considerable tax benefits for acquirer Deal holds low tax benefits for acquirer Low tax benefits Lower
Prudent use of debt Use excessive leverage No leverage Higher/Neutral
Implement earn-outs Pay everything up-front No earn outs Lower
Financially skewed to SUS, but Simbionix larger

Merger of equals Skewed deal Neutral/Negative
organisation
Significant insider ownership Low or no insider ownership Considerable insider ownership Higher
Shareholder-friendly management Entrenched management Deal was value-accretive to SUS shareholders Higher
Acquirer represents active investor Acquirer represents passive investor SUS actively integrates and develops Simbionix Higher
Source: Adapted from ‘Deals from Hell: M&A Lessons That Rise Above the Ashes’ by Robert F. Bruner, Redeye Research
50
We judge that several categories in Professor Bruner’s framework do not apply to serial
acquirers as we define them. Specifically, we believe that by practising M&A over and over
through many smaller acquisitions, serial acquirers mitigate several factors which Bruner
regards as likely to lower the acquirer’s return.
• Opportunistic versus strategic deals: Many serial acquirers build relationships with
potential acquirees over the years and seize the opportunity when they come up for
sale
• Synergies: Most serial acquirers buy at valuations where synergies are not needed to
justify the deal; a decentralised organisation usually leads to limited or no synergies
• Hostile takeover versus negotiation with target: Serial acquirers are usually the
opposite of a hostile buyer, a preferred buyer and permanent home for acquirees; only
buying good companies with competent management removes the need for hostile
takeovers and restructuring to earn required returns
• Tax benefits: Like synergies, tax benefits are usually not needed to justify the purchase
price, given the low valuation at which the serial acquirer bought a business
• Deal structure: Many serial acquirers use earn-outs, though several successful ones
have proven that the business model works even when paying 100% of the purchase
price upfront
• Merger of equals versus skewed deal: The serial acquirer business model builds on
making many small acquisitions instead of a few large ones, with the small acquiree
becoming part of the serial acquirers considerably larger decentralised organisation
• Active versus passive role post-acquisition: Most serial acquirers have a hands-off
approach and a decentralised organisation; only buying great companies mitigates
the need for actively intervening in subsidiaries in most cases; shared excellence
programs among subsidiaries make interference by headquarters unnecessary
To be fair, we have not conducted a quantitative study of the above factors, though they usually
feature as central pillars in serial acquirers’ M&A strategies. Still, one could argue that serial
acquirers may be successful despite some aspects of their M&A strategy not being optimal for
returns. At the same time, quality serial acquirers commonly conduct their M&A affairs in ways
which Bruner argues are likely to increase the buyer’s return: Notably, they
• Pay reasonable/cheap valuations

• Often acquire companies in related niches/industries
• Use M&A to deploy excess cash profitably
• Buy private companies through negotiated deals
• Usually keep to their home turf or enter new markets with caution
• Do not overpay in ‘hot’ markets
• Pay wholly or primarily in cash
• Use prudent leverage
• Feature significant insider ownership
• Have shareholder-friendly management
Another interesting finding of Bruner’s literature analysis constitutes average returns on M&A.
High-profile and large M&A deals usually get the brunt of media attention, especially if they fail
and involve an exchange-listed acquiree. Thus, there exists a commonly accepted notion that
the average M&A deal yields poor returns. However, Bruner’s findings reveal that, on average,
M&A deals yield approximately buyers’ required return on investment. Notably, Professor Bruner
remarks that most sources touting M&A as a loser’s game usually examine skewed samples:
M&A of large publicly listed companies in ‘hot’ markets, e.g., during the dotcom bubble in the
late 1990s. In contrast, acquisitions of smaller private companies in normal or ‘cold’ markets
usually earn respectable returns but get considerably less attention.
51
Lastly, Bruner also presents a framework of six factors which, upon convergence, make M&A
failure, and, in some cases, disasters, likely:
• Complexity
o Highly complex systems are easy to misunderstand and challenging to
manage; high complexity may lead to rippling side effects that are difficult to
control
o Examples: Two complex and large organisations merge with over-optimistic
integration timelines and simplistic assumptions for the operational
development of complex operations (e.g., railroads or filmmaking), acquiree
undergoes complex technological/operational transition
• Tight coupling
o No or little margin of error and backup plans make adverse events
challenging to stop and reverse
o Examples: Tight financing forces a company to skip necessary CAPEX, high
leverage to finance a deal makes a decline in profits potentially disastrous,
manufacturing and distribution systems without margin of safety
• Management choices
o Management makes bad strategic choices which compound other factors in
this list to create a disaster
o Examples: Management decides to scrap the merger plan and proceed ad
hoc, diversification into unrelated industries
• Cognitive bias
o Acquirer displays cognitive biases, e.g., endowment effect, confirmation
bias, sunk cost fallacy, and overconfidence, among others
o Examples: Management touts over-optimism to shareholders and hides
problems developing internally, mergers primarily motivated by ‘empire-
building’, aggressive leverage that is sustainable only through equally
aggressive realisation of synergies, management escalates commitments to
save face
• Business not as usual

o Conditions diverge from their normal state or expectations, creating room
for other factors in this list to initiate negative chain reactions
o Examples: Industry decline, regulatory changes, drastic change in inflation
and interest rates, natural disasters, aggressive operational changes post-
acquisition without considering feasibility, operational decline at acquiree
needs careful mending, rapid technological shifts, changing consumer
tastes, intensifying competition
• Inappropriate response
o Developing disaster conditions are not mitigated or even amplified by
inappropriate responses
o Examples: Different cultures clash and complicate post-acquisition
integration, infighting and high staff turnover, hiring incompetent external
management to lead acquiree post-acquisition
52
Redeye equity research team
Management
Os kar Vilhelmsson
[email protected]
Björn Fahlén
D anesh Zare
[email protected]
[email protected]
Tom as Otterbeck
[email protected] Editorial
Joel Karlsson
Technology Team [email protected]
Hjalmar Ahlberg
Mark Siöstedt
[email protected]
[email protected]
Henrik Alveskog
[email protected]
Life Science Team
Mattias Ehrenborg Sebastian Andersson
[email protected] [email protected]
Alexander Flening Os car Bergman

alexander [email protected] [email protected]
Jes sica Grunewald Christian Binder

[email protected] [email protected]
Jes per von Koch Filip Einarsson

[email protected]
[email protected]
Mats Hyttinge
Anton Hoof
[email protected]
[email protected]
Ethel Luvall
Ras mus Jacobsson
[email protected]
[email protected]
Gus taf Meyer
Viktor Lindström
[email protected]
viktor.lindströ[email protected]
Richard Ramanius
Fredrik Nilsson
[email protected]
[email protected]
Kevin Sule
Fredrik Reuterhäll [email protected]
[email protected]
Fredrik Thor
Mark Siöstedt [email protected]
[email protected]
Johan Unnérus
Jacob Svensson [email protected]
[email protected]
Niklas Sävås
[email protected]
53
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CONFLICT OF INTERESTS
Niklas Sävås owns shares in Addlife, Bergman & Beving, Carasent, Green Landscaping, and Lagercrantz.
Christian Binder owns shares in Bergman & Beving, Berkshire Hathaway, Carasent, and Investor.
Redeye performs/have performed services for Addnode, Vitec Software, Lagercrantz, and Sdiptech
and receives/have received compensation from these Companies in connection with this.
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Theme Update

Equity Research 27 February 2023

Optimism returned but the storm might not be over

Serial acquirer news flow in Q4 2022 80

cost increases fast enough to avoid (temporary) margin compression. 0

Serial acquirers theme event 2023

Dividends/share buybacks: The hot potato ......................................................................... 39

Serial acquirer news flow in Q4 2022

Vitec: Solid growth in uncertain times

Vitec: Acquisitions in 2022

Vitec: Large acquisition in the Netherlands

Vitec: The long-term view

Vitec: Historical key financials and M&A

Vitec: Historical M&A

Acquired sales (previous year)

Lagercrantz: Strong cash flow

Lagercrantz: Acquisitions in 2022

Lagercrantz: The long-term view

Lagercrantz: Historical key financials and M&A

Lagercrantz: Historical M&A

Sdiptech: Still impacted by soft development in the largest unit

Sdiptech: Acquisitions in 2022

Sdiptech: Organic versus acquired growth

Sdiptech: The long-term view

Sdiptech: Historical key financials and M&A

Sdiptech: Historical M&A

800 Estimated acquired EBITA 8

Addnode: Strengthening its offering to public real estate companies

Addnode: Acquisitions in 2022

Comments on select other niche acquirers

Bergman & Beving: Margin expansion continues

Source: Bergman & Beving (actuals), Redeye Research (chart structuring)

Bergman & Beving: The long-term view

Bergman & Beving: Historical key financials and M&A

Net cash deployed on acq na 92 191 68 207 107 137 184

Bergman & Beving: Historical M&A

Bergman & Beving: Historical key financials and M&A

Note: Figures until 2016/2017 include Alligo/Momentum Group

Addlife: Mean reversion crashed the party

Addlife: Historical key financials and M&A

Addlife: Historical M&A

Momentum Group: No slowdown in acquisition pace

Teqnion: Compounder in the making?

Teqnion: Historical key financials and M&A

Net cash deployed on acq 8 4 57 50 59 159 133

EV/Sales initial (x) na 0.1 0.3 0.2 0.2 0.5 0.7

On average, c46% of the maximum considerations in Teqnion’s M&A deals constitute

Teqnion: Historical M&A

Previous year sales Previous year EBIT Number of acquisitions (rhs)

Volati: Bolt-ons and some notes on comparables

Corroventa Sweden: Net sales and EBIT in 2015-2021

Source: allabolag.se (financial figures), Redeye Research (chart structuring)

Volati: The long-term view

Volati: Historical key financials and M&A

Volati: Historical M&A

Lifco: The OG acquirer

Lifco: Historical key financials and M&A

Lifco: Historical M&A

Röko: Fredrik Karlsson is back with a vengeance

Röko: Historical key financials and M&A