Serial Acquirers

Storskogen vs. Mittelstand “succession crisis”

Gustaf Hakansson
February 11, 2022
PE showed Constellation Software (CSI) that the scaling of quality M&A is possible. In turn, CSI’s aggressiveness has paved the way for the likes of Storskogen Group...

The aggressive serial acquirer Storskogen ("The Great Forest" in Swedish) signed an agreement late last year to acquire the Swiss machine-tool peripherals firm LNS Holding SA for c. 9.7x LTM EBITA (11.4% EBITA margin), assuming full earn-outs.

It is their largest firm acquisition yet, with an EV of CHF 200m. And they have acquired ten firms YTD.

CEO Daniel Kaplan intends to keep up the EBITA growth he has sustained during the last couple of years, which is c. 70% annually. Their organic growth target of GDP +1% to 2% gives us a clue on their ambitious M&A plans.

Storskogen's M&A team has scaled to c. 100 people spread over seven groups in Sweden, Denmark, Norway, the UK, Germany, and Switzerland; they will also expand into Asia and the US.

Storskogen invests in its M&A teams to keep accumulating small targets, similar to the decentralised strategy of Constellation Software ("CSI"). And when Storskogen establishes themselves in new geographies, they are willing to make more significant acquisitions (just like CSI).

CEO Daniel Kaplan sees only limited valuation inflation for targets. They can acquire targets at lower valuations than PEs and strategics as Storskogen are open to fulfilling non-financial seller considerations.

They are perpetual owners and do not merge targets (save for bolt-ons), alter brands, or move operations from smaller cities where some targets are essential civic institutions.

While the perpetual owner model of accumulating SMEs is popular in Sweden, the long-term focus remains rare internationally.

Reach out to Storskogen here if you want to engage in an unconditional discussion regarding succession planning for your firm.

Many ambitious serial acquirers seem to tap out, at around 15 acquisitions annually, when they have to make the leap from investment team to investment organization. But PE showed Constellation Software (CSI) that scaling quality M&A is possible. In turn, CSI’s aggressiveness has paved the way for the likes of Storskogen Group, who, if macro plays ball, may continue to catalyze even further activity...

CSI seems to have acquired most firms between c. 0.7x to 1.1x sales. An anecdotal peek into their quick and valuation disciplined process can be found in this gem of a tweet.

Disclaimer: This is not investment advice. Information is provided 'as is' and solely for informational purposes, not for trading purposes or advice. Any reference to or omission of any reference to any company should not be construed as a recommendation to buy, sell or take any other action with respect to any security of any such company. The author may hold positions in securities discussed. Any forward looking-statement is subject to risks and uncertainties. Read further disclosure in the Terms of Service.

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Worth reading!
Chris Mayer
Author of 100-Baggers
PM & co-founder, Woodlock House Family Capital
Brett Kelly
Founder & CEO
Kelly+Partners Group