Content Published Last Week

1. Röko: Building a Leading Serial Acquirer

2. Enterprise Research: Röko: Sector-Agnostic vs Sector Focused Acquirers

3. Olo: Vision, Competition & Innovator's Dilemma

4. Spirax Sarco: Customer Centricity

5. Ashtead & Equipment Rental

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Röko, Berkshire, & Sector Agnostic Acquirers

We interviewed the Former CEO of Lifco and Founder and Current CEO at Röko, a Swedish perpetual owner of family-run SME's across Europe. The company has scaled to ~100m EUR EBITA in 4 years and plans to go public soon.

This interview was insightful for anyone who is interested in companies that consistently use accretive M&A such as Danaher, Constellation Software, Berkshire, Lagercrantz, Addtech, Lifco, etc.

On our Enterprise Tier, we explore Röko in more detail and discuss two interesting characteristics of its model: minority interests and sector agnostic M&A.

Röko is rigorously sector agnostic and only buys ~70% with a 10-year put call option to keep the founders aligned. Röko's model is closer to Berkshire's org structure than any typical Swedish industrial acquirer.

Our work on Röko led us to question the value of being sector-focused vs agnostic as a serial acquirer. How should we weigh organic growth and ROIIC for sector-agnostic and focused acquirers? And we discuss the challenges of sector-focused acquirers like Halma or Diploma PLC as they scale beyond the critical inflection point of ~$500m EBITA.

Karlsson has 20 years of experience scaling Lifco, one of the leading acquirers in Europe. There are many insights from studying Röko that helped us appreciate Berkshire, CSU, and Danaher on a whole new level. Karlsson has realised Buffett has investment nirvana and it seems like Röko aims to be his own version.

We only buy private companies but [Buffett] is forced to buy public companies. We prefer private companies because they are much cheaper. Buffett does what I call investment nirvana, he buys a business with good management then does nothing. - Former CEO of Lifco and Current CEO of Röko

Olo: Vision, Competition & Innovator's Dilemma

In a post-pandemic world, Olo is trying to find its next chapter of growth in Olo Pay. This further brings the POS and Olo closer as the latter tries to capture wallet share. A Former Olo Sales Director who spent years working closely with Noah lays out why he thinks Olo has the right to be a standalone company rather than a feature within a POS:

You think about that world, the other POS companies within enterprise, NCR is still number one; number two you’d say PAR with Brink has come up, and then there's a lot of noise. Then there’s Toast in the SMB and midmarket, and it’s seeking to go up. The definition, in my mind, of point of sale changed when Shake Shack, Sweetgreen, and Wingstop got the majority of transactions coming through here. They’re a mobile device, a 50% plus digital business, meaning Olo is the point of sale in that world; the POS is a dumb calculator in my mind. You need the dumb things to make it work in the back of house, such as a kitchen display system, a printer that shoots out orders, and then there’s labor and all the things that happen to manage the staff and food ordering and product control. The natural thing is to say, yes, the POS company should offer this as a feature, but I think it's more strategic than that; otherwise, it would have happened. - Former Sales Director at Olo

Spirax Sarco: Customer Centricity

Spirax Sarco is one of the highest quality companies in the UK that has consistently earned ~20% ROIC for decades. The company sells steam engineering systems and industrial pumps to manufacturers and pharmaceutical companies globally. A Former Director at Spirax Sarco lays out why the company consistently earns such high returns on capital:

Customer centricity is the main differentiator over the competition. The top three customer requirements were quality, relationships and availability. The group has a direct sales model which allows it to differentiate on relationships. They have 2,100 sales and service engineers across the group and that takes years to replicate. These quality products are safety critical and a wrong application could kill people, therefore the learning curve is significant. For a new organization to put that in place, it would take years, with limited payback. - Former Director at Spirax Sarco

Ashtead & Equipment Rental

In this audio-only research analysis, we explore what we've learned about Ashtead and equipment rental, why it earns higher than expected ROIC compared to other rental businesses, and potential challenges in rates and volume going forward.