The art of the serial acquirer
The holding company makes all the acquisitions, and the various companies feed profits back to it for reinvestment
There is a group of companies that follow a business model of serial acquisitions. The best known of these, of course, is Berkshire Hathaway. There are also names such as Constellation Software (Canada), LVMH (France), Chapters Group (Germany), Lifco (Sweden), Washington H Soul Pattinson & Co (Australia), and home-grown South African success story Bidvest Group, to name a few. These companies come in many shapes and sizes and have different investment strategies. But there are key characteristics.
These businesses generally operate a holding company (HoldCo) structure or model. The HoldCo makes all the acquisitions, and the various companies feed profits back to the HoldCo for reinvestment. The HoldCo generally buys 100% of the company or a majority stake in the underlying companies as it wants to control strategy and, crucially, cash flow. Where it buys less than 100%, there is generally a path for it to get to 100% through some earn-out provision over the next few years...<...
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