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Reminder of 10 Most Popular Articles in 2024

  1. M&A Accounting: Constellation Software, Vitec, Lifco, Lagercrantz, & Teqnion: by far, this was the most read article in 2024. We explore purchase price accounting and compare accounting methodologies of the top, most acquisitive companies globally 
  2. Ferguson vs Watsco: HVAC Distribution: a Former VP at Ferguson explores how its HVAC distribution business competes with Watsco 
  3. Lifco vs Halma: M&A Team Structure & Incentives: we compare how Lifco and Halma organise and compensate their M&A team and the implications on capital deployed and ROIIC
  4. Pall, Cytiva & the Bioprocessing Manufacturing Process: Former VP at Pall walks through Cytiva and Pall’s bioprocessing portfolio assets and potential synergies 
  5. Constellation Software vs Private Equity Operating Strategies: a Former Constellation Software and Thoma Bravo Executive compares the two operating models 
  6. Domino's Pizza: Fortressing a Market: Former CEO of Domino’s Pizza Group walks through the company’s fortressing strategy, why it works, and when it fails
  7. Sunbelt vs United: the Nature of Equipment Rental Competition: a Former Equipment Rental company owner shares the story of selling to Sunbelt and how the company changed the business post-acquisition. 
  8. Loar Group: Portfolio Quality: Former Loar Group Executive walks through the different types of assets Loar owns compared to TransDigm. 
  9. Topicus: History, Culture, and Organic Growth Techniques: a Former Director at Topicus shares a history of the company and compares the approach to organic growth vs TSS. 
  10. Moncler, Hermès, & Scaling Luxury Brands: a Former Manager at Moncler shares the challenges of mid-market luxury brands competing with LVMH and Hèrmes.

Danaher vs Thermo Fisher

In 2019, Thermo Fisher acquired Brammer Bio for $1.7bn, a leader in viral vector manufacturing for gene and cell therapies. Two years later, Danaher eclipsed Thermo and acquired Aldevron, the ‘gold standard’ for GMP DNA, for ~$10bn. Both companies were not cheap; Brammer and Aldevron were acquired at ~40x and ~60x LTM earnings, respectively. 

Both acquisitions came as cell and gene therapies began to grow:

Cell and gene therapies require plasmids, a critical raw material for the production of viral vectors which is also used as the template for the production of mRNA. There are typically three plasmids per viral vector. Both products are critical ingredients and potential bottlenecks in cell and gene therapy manufacturing. Brammer is known as the gold standard for viral vectors, Aldevron for plasmids.

This interview explores the history of Aldevron and how Thermo attempted to enter the GMP DNA business. Thermo tried to source and repackage plasmids from a CDMO to sell to customers. This failed:

I was selling plasmids for Thermo, but Arranta was making them. We had Thermo employees and dual-paid staff at the Arranta site. I only lasted five months there because their costs were two to three times higher than Aldevron's, and they weren't willing to lower them. Their timelines were also longer, taking 11 months to make GMP plasmids compared to Aldevron's seven months. - Former VP at Aldevron, Danaher

Both Thermo and DHR offer a range of bioprocessing services; the aim is to be a one-stop shop. This interview provides a glimpse into the philosophy of each company and level of integration and collaboration internally: 

The goal is an all-in-one shop, from start to finish. Thermo Fisher tries this, but during my short time there, I noticed internal conflicts. For example, the viral vector team didn't get along with the DNA team, preferring to buy externally rather than collaborate internally… It was really bizarre. I think Thermo is better at acquiring companies and letting them operate than building from within. This was new for Thermo, building a business internally. The bureaucracy and everything made it a losing endeavor, and I think they gave up on it. - Former VP at Aldevron, Danaher

Finally, the elephant in the room: are plasmids a commodity?

The biggest challenge is that plasmids are increasingly seen as a commodity, and there's a push for them to be cheaper. The biggest threat is synthetic DNA, which is cell-free and quick. Historically, the problem with synthetic DNA has been the scale at which it can be produced, but I've heard that people are starting to overcome these challenges. However, no one wants to be the first to adopt it; everyone wants to be second. - Former VP at Aldevron, Danaher

Amazon Fulfilment Unit Costs

This interview is with a Former Robotics Director at Amazon who was responsible for deploying internally developed automation into Amazon’s Fulfilment, Ground, and Air networks globally. 

Internally, the Amazon Fulfilment Technology (AFT) team is responsible for developing software and hardware to improve fulfilment efficiency. This includes its custom warehouse management system, KIVA, and all routing technology. The group is rigorously measured on driving lower costs:

Each year, like most companies, we had to demonstrate how much money we saved the company. This needed to be audited by finance; you couldn't just estimate savings. You had to show where it appeared in the P&L, which I believe is essential. One year, AFT saved the company a billion dollars. It wasn't just one thing; it was a combination of factors. The automation was powerful because it enhanced human productivity. - Former Director of WW Robotics

While there are thousands of engineers in the AFT group, there still seems to be room to increase automation and improve fulfilment efficiency: 

One of your questions is about the extent of automation. Depending on how you count, an item might be touched 12 or more times from when it enters a fulfillment center until it is on a truck. Only a few of those processes are automated, which is why you still need 2,500 people in the building, even in an automated facility. - Former Director of WW Robotics

Combining a relentless pursuit of reducing fulfilment costs per unit combined with owning more delivery stations and last mile routes, AMZN aims to achieve the counter-intuitive holy-grail of the fastest delivery at the lowest cost:

This interview explores the history of KIVA, Amazon’s approach to automation, and how the company plans to use automation to reduce unit costs even further. 

CCC vs Mitchell: Switching Costs

CCC provides claims estimation software to 27 of the top 30 US insurance providers. Progressive is the only major insurer that uses Mitchell. PGR has a customized Mitchell solution at rock-bottom pricing. This interview with a Former Progressive Claims executive explores the history of Progressive and Mitchell and the switching costs for smaller insurers shifting from CCC to Mitchell:

Most companies feel like they want to give Mitchell a chance. At the last SEMA, which was in Georgia, right after Covid, they realized they're in the ballpark because some big players, like USAA, are using both. Progressive is using it, and State Farm is trying to pilot it in an estate. If they could get one more big company, then I think they'll be in a good position. - Former Director of Claims at Progressive Insurance

BasicFit Gym: Spain vs Germany vs UK member density

This interview with a Former McFit Spain executive, who worked at the company before and after the BasicFit transaction, explores how the Spanish market is different to Germany. One insight is how the discount gym member density per sqm is lower in Spain than other markets. The average McFit in Spain was ~1,800m2 yet membership per gym rarely hit 3,500:

Here in Spain, a brand has almost never exceeded the barrier of 3,500, on average. Almost never. I think a realistic average right now is 2,500 market average, because there will be peaks and highs. Anything above 3500, approaching 4,000, is wonderful. - Former Executive at McFit Spain, BasicFit

The UK average discount gym is ~1,100 sqm and both Pure Gym and GYM aim for ~3,000 members after 2 years. The lack of member density Spain seems to be due to fitness habits:

in the end, it's what I'm telling you, the problem you have in Spain, which is the difference with Europe, is that a German and probably a French person too, Monday at 7:00 PM it's full, they change their schedule to try to go to the gym when it's not full. And in Spain no; in Spain everyone signs up because everyone wants to go at that time and everyone gets angry because at that time they can't train. But nobody bothers to say well, I'll go Thursday or Friday when there are fewer people or I'll go at noon or in the morning. - Former Executive at McFit Spain, BasicFit

The interview goes on to explore the history of BFIT in Spain, competition, and capex per gym.