A PE and public success story
Installation industry veteran Per Sjöstrand shook hands with PE house FSN Capital in 2014. They acquired five installation firms and formed the Instalco platform. Today around 100 firms in the decentralized Nordic organization send monthly status reports to HQ.
Since the 2017 public listing, the firm has had a shareholder return CAGR of over 60%.
Instalco looks at installation firms' (heating, cooling, plumbing, electrical, and ventilation) three-year average EBITA and applies a 5x multiple. The effective multiple get lower thanks to attacking installation project wallets holistically.
Instalco makes 100% acquisitions, but sellers have to reinvest 20% of proceeds into Instalco. The strategy fosters a team spirit that helps with proprietary origination. A critical advantage as Instalco is not usually the highest auction bidder.
Instalco looks for outfits with solid regional market positions. Tells of a regional moat include years of operation, strong unit economics, and competent leadership.
Acquired leaders must be team players as they have to share best practices and clients. They get benchmarked on KPIs, and subsidiaries cross-pollinate each others' boards and are not afraid to give friendly but frank advice.
Due-diligence times for Instalco have gone up to 6 months from 4.
While Finnish business culture is similar to Swedish, Norway has more formalities and is "ten years behind Sweden".
Sjöstrand regrets only four acquisitions out of around 100. One had big projects where Instalco did not verify adequate pricing. A common theme of failed acquisitions for Instalco has been the lack of team spirit at the acquired firm.
Sjöstrand reiterates the common saying among serial acquirers: "everybody can make acquisitions; the hard part is keeping the entrepreneurial spirit".
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