"My observation is that acquisitions have the best chance of creating value where the business purchased as nearly as possible meets the following criteria: it is paid for by internally generated cash, it is a replica of one already owned by the purchaser, it is a bolt-on or quasi-bolt-on, and it is likely to improve the quality as well as the quantity of earnings. This is effectively the route we have followed in Halma." - David Barber, Halma Cofounder and Former CEO, 1998

Halma is a UK-listed serial acquirer of highly-specialized industrial and medical companies that dominate small, niche markets. In 1972, David Barber founded the company with a simple set of principles to create long-term shareholder value: use retained earnings to acquire profitable, niche businesses that management understands. Over the last 20 years, Halma has compounded FCF at 15% and the dividend per share has compounded 5% for over 33 years. Barber’s philosophy underpins Halma’s success and forms the foundation of the company’s strategy today.

There are many great write-ups by Scott Management here, Exploring Context here, and Demesne Investments here which explain and categorize types of serial acquirers. This note builds on these write-ups so if you haven't already, we'd advise reading each piece before this Weekly Analysis.

In December, we interviewed three former executives of Halma operating companies to explore a question that we believe is crucial for ‘platform-type’ roll-ups: how is the company organised to scale acquisitions.

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