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How does the put call option work, typically, if you only acquire 70%?

The put call option works in the following way. At day one after the acquisition, it is valued equal to what the management team invested for that put call, or retained as a share in the transaction. Going forward, the put call for each respective company, we have a model where we apply a multiple to the average earnings that that company has had – normally the three-year average for each company – and we apply a multiple to that, and then multiply that with whatever minority share that is retained by the entrepreneur or management team. To put things simply, if the companies we have invested in perform better and grow their profits, the put call option will increase in value, or our liability will increase going forward. If they perform worse, it will go down. So far, we revalue the put call once per year in our financial year end. In 2021, the put call option increased due to performance of the underlying companies, meaning that the underlying companies performed better financially, and in 2022 it was the same. The put call liability increased in 2022, as well.

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How have you deployed so much capital already though? I think you've done 2.4 billion last year, a similar amount to Lifco last year.

Since day one, we have worked a lot with building this network of corporate brokers, and we have ensured focus on being able to assess a lot of opportunities at any point in time. We have had an extra tank, you could say, given that we have had committed capital from our shareholders, so we have had money to invest; it's not that we have needed to be self-funded from day one. We have had that cash available, so we have actually been able to go after a large set of potential opportunities, and relatively large companies as well, from the start. But I think what has really been the case is we have invested a lot of time in building deal flow, building relationships to brokers, staying true to our word in the transaction processes, therefore being able to already see actually a bit of repeat business. We have bought more than one business for instance from the same corporate broker, which means that the actual individual who sold a business to us maybe two years ago, or helped sell a business two years ago, comes back with a new opportunity, can speak well about how we behave. I think that has been really key, and we have been very focused on ensuring that.

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