The Nordic Compounder Playbook: How Lagercrantz Bought 90 Companies and Never Sold One

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2:18Hello, M &A scientists. Welcome to the M &A Science Podcast. This show is part of our mission to rethink how M &A is done and build the operating standard for buy-side M &A, that old-school seller-led approach. Dead, buy-led M &A is about strategy, alignment, and execution, putting value creation at the center of every deal. It's not just about closing the deal. It's about making it successful. And that comes from learning directly from the operators who've done it. You want to go deeper? We've got you covered. We've got tons of free resources on the website, frameworks, guides, tools, all built from real operator experience.

2:54We also have the M &A Science membership, which gives you the full system, exclusive frameworks, templates, expert Q &A sessions, direct access to me, and the AI-powered deal pilot. It's the home of BioLead M &A. If you just want to stay sharp, sign up for our free newsletter. It's the best way to keep up with what's happening in M &A. You can find everything at mascience.com. I'm your host, Kisan Patel. This is part one of a two-part series. Part two drops next week, June 4th. Today, we're covering the deal model. If you're running programmatic M &A, advising serial acquirers, or trying to hold pricing discipline when private equity shows up with a bigger number.

3:36Part two is the operating culture behind 85 autonomous companies and why this model works in the Nordics when most attempts to replicate it fail. Make sure you're subscribed so you can get notified when it's live. Today I'm joined by Jorgen Veig, president and CEO of Lagerkrantz Group. It's a Nasdaq Stockholm-listed tech group that he's led for over 20 years. Under his watch, Lagerkrantz is compounded from a small spin-out into a business doing over 10 billion Swedish krona, over a billion US dollar revenue with 85 niche B2B tech companies across Northern Europe, the US, China, India. He's done more than 90 acquisitions, delivered 15 consecutive years of record earnings per share, and built one of the most disciplined serial acquirer models in Europe, all while holding every company forever.

4:33No exit horizon, no flipping, no integration, just compounding. He's also chairman of Bergman and Beving, which makes him a front row operator in the Nordic compounder ecosystem that includes Lifco, Intutrade, Adtech, and LogarKontz itself, a category that's quietly outperformed global markets for decades. We're getting into how the model actually works, how he holds pricing discipline when private equity shows up with term sheets at 11x, how do you operate 85 autonomous companies without a central holding company tax, and why this model has worked so disproportionately well in the Nordics. In this episode, you'll learn how a 20-year operator runs a buy and hold forever acquisition model at scale, how to win proprietary deals against private equity, hold pricing discipline through market cycles, run a decentralized portfolio of 85 companies, and why the Nordic serial acquire model works when most global attempts to copy it fail.

5:35Jorgen, how are you doing today? Thank you for having me. That was a long intro. I hope we cover all this stuff. One, thank you so much for hosting me live. We're here in Stockholm at Jönkren's world headquarters. Can we kick things off a little bit about your background?

5:48Jörgen Wigh:I grew up in a small rural community in the midst of Sweden. And then I studied at Stockholm School of Economics. So I've done some finance and stuff over the years. I worked some years, five years or so as an analyst doing a lot of valuation of different companies. Then I joined McKinsey for a couple of years. And then I was recruited into this by Mr. Anders Bergersson that was behind the Bergman and Beavine group, being the CEO and that company for plus 10 years or so in 1998. And then we worked together for some three years. And then after that, we decided to do the spinout. So I was part of the spin-outs that has been talked about a lot about from the Bergman and Beaving Group that is consisting of a number of companies, five or six different listed companies, all doing different kinds of compounding over the years.

6:37Jörgen Wigh:I left the group in 2001 doing my own thing. I had done some pricing work before, pricing and revenue management consultancy. So I also got that part into it and founded my own company called Price Gain that I was part of founding. Worked for some years there, but then I was recruited back into Lager Crowns in 2006 and have now been the CEO for a little bit more than 20 years. That's quite a transition experience. You got it firsthand with the spinoff, then you started your own business. What prompted the transition from leaving your own business and then going back to Lager Crowns? I have always been fond of this model and how we work.

7:13Jörgen Wigh:I really wanted to get going with building it for myself and be part of it fully. And when I got the chance to come back as the CEO there, I had founded my own company before. So it was a bit of a difficult decision to either run my totally independent, my own company, or together with a friend, we had it. Or to come back and really do the compounding and really get going with Lagercrans. And Lagercrans has faced some challenges. After 2001, we were, as a separate listed company, we were struggling with low margins. So the company was struggling with low margins and not a very great performance.

7:44Jörgen Wigh:So it was also a bit of a turnaround that we had in front of us. And that I found challenging and from a professional perspective, quite interesting. You wanted to challenge and you had an itch for M &A. Was that always part of the thesis? Yeah, we really needed to go back to the foundation, the roots where we came from. We're doing a lot of decentralization, working with a management by objectives and those type of frameworks within the group. So we decentralized the whole thing. We made sure that we really made the companies independent, working in an autonomous way in each of them. And we also changed the direction of where we did our capital allocation.

8:20Jörgen Wigh:So we went from things that we felt were a lot within electronics, with short product life cycles, things changing all the time, to really get something that is more stable and that have consistently and over a long period of time, good cash flows coming out of it. Building that step by step, we actually changed the content of Logik Rans dramatically from 2005 up until 2015 or so. Then onwards, we have consistently built through more proprietary product type companies, as opposed to maybe doing more value-adding distribution and the other type of companies earlier on that we felt didn't have the same opportunities for growth and profitability.

8:59So a lot of it was fixing the core business that first decade and really optimizing what that business looks like. You even mentioned where you're focusing on which business lines that are rapidly changing, probably lowering a lot of R &D overhead you run into. In the last decade, you've been accelerating with a lot more M &A. Yes. But you're able to do that because you have a strong base of business. Yes. Can we talk about the business model? You have 85 companies. Yeah. And your model is to acquire and hold forever. Can you walk me through, I guess, how do you think through that business model and why does that logic work?

9:33Jörgen Wigh:It's a beautiful business model, I'd say. It's a model where we are looking for really good companies and have a sort of a great perspective on them. We would like them to work independently. We would like them to have a strong management team. We want them to work under their own brand name and they're dedicated to their own market with a dedicated local management team running the thing. And we can be supportive of them. We can help them with some aspects of their business. People have been very domestic in their approach and we try to make them more international or we try to find other ways of growing the companies.

10:10Jörgen Wigh:but it's run autonomously in a local sort of framework. We are good at following up on the companies. We're good at challenging them in terms of setting the targets, getting the right people on board and grow the businesses. And the ambition we have is to grow profits every year by 15%, which means that we double our profits in the group every five years, roughly. There's a combination of organic growth and inorganic growth. We have broken that down. So we think that basically one third of the growth should come organically and two thirds inorganically out of acquisitions. And that means that we should basically acquire some 10 % of ourselves every year in order to grow the business in that pace.

10:52All right. This is so you know the business.

10:55Jörgen Wigh:Yeah. I want to get this right. So a lot of these businesses, the common element is that they're very localized, that you have a local team that runs it. Yeah. And that you have a commitment from that management team. And then you factor in broadly how much you're investing in for inorganic growth to keep adding on those businesses. What must be true about these businesses for you to be interested to buy them? Beyond like the local management team, is it other things about how the business operates? Yeah. Financials and... We would like the companies to be strong in there. We always talk about niches.

11:25Jörgen Wigh:We're talking parts of the market where you actually have a strong player. And we would like them to be B2B, either industrial companies or tech companies. Everything that we do is actually within hardware. We have not been into software that much, but basically the core foundation is within industrial companies. And the desire for strong market leadership and strong players in the market translates into that. We also see some consistency in terms of financials. So when you have a strong market position in a niche and have that year in and year out, that usually translates in really good numbers.

11:59Jörgen Wigh:We're actually looking for companies that have very good numbers. So we are looking at companies that have an EBITDA margin or plus 15 to 20 % or so. And we would like to build through that. And that usually translates into cash flows. So we can take that cash flow out of those businesses that we already own and put that into new businesses and maybe acquire them at four to eight times EBITDA. And that usually translates into that we have a return on capital employed of some 20 % or so. When you say niche, can you give me an example? What's the business you find interesting in your portfolio? Yeah, we have a number of them.

12:35Jörgen Wigh:But just to give you an example, we found a company a couple of years back that is really strong in building different types of security and safety solutions for helicopter decks offshore. Okay. So think about the company, a vessel, or it might be an oil platform, it might be a wind turbine situation where you need to land with a helicopter. Those are very rough environments. A lot of ice, a lot of wind, a lot of bad weather. And there you need to have a safe environment to be able to land with a helicopter. And that means that you have the circle and H lights around where you land. You have the nets that is covering the platform and you have perimeter nets around that.

13:12Jörgen Wigh:And this company has just been, it's just a market leader of building these type of solutions for helicopter decks offshore. And that usually translates is that they're very known in their niche, in their market. And that also translates in that they are doing some great business. in that specific niche. And it's a global niche. So they are all over the world with these solutions. That's a great example. Very niche. Yeah. With that management team, when you look at these business, what's the nature of it? I think of businesses where a person's looking to retire, a founder of business situation.

13:44I guess, what do you typically buy into? Because a lot of times people want to retain a management team. They want to have some continuance of the business.

13:52Jörgen Wigh:It's fair to say that many of the companies that we look into are also very established sort of brick and mortar type businesses. So it's usually in some type of succession planning that they are for sale. They might have been run by three generations of a family, but eventually the family is so broad, there are so many siblings, and it just gets too complicated to find a succession in the next phase. And usually the sons and daughters are maybe not always, but sometimes not that interested in running the business. They are doing other stuff in life. And then we come in there and then we have like a transition period.

14:27Jörgen Wigh:We work with them locally. We have a build a great trust. Most of the sellers want the company to be kept as it is, basically. They don't want to take down the sort of brand name of the company or move the company or lay everyone off and integrate it with something else. They want the company to continue doing what it's been doing for decades. That is like a very common situation where we come in. And then we usually work with the family before acquiring the company for some time. That might be three months or it might be three years or it might be 10 years, but eventually we usually get through and then we can acquire the company.

15:01Jörgen Wigh:And then we usually work with a transition period where we have some earnouts and setups. That means that we both sellers and buyers are working together with the company for some three to four years or so before we actually take over fully or that we are. It's not, we might own a hundred percent during that time, but they are incentivized through some earnouts, other types of a range. For about three, four years. Yeah. So you'll still keep that principle around for a period of time. Yes. I'm curious about the model where you run these businesses as independent businesses. Essentially, integration isn't the big driver.

15:35You're not doing big layoffs and the typical slashing. And then you don't do any of that. Have you ever heard of a thing called synergies? Yeah.

15:46Jörgen Wigh:Yes. Sometimes we talk about synergies as well. We do some add-on acquisitions sometimes. We talk about synergies. But we are not looking for synergies or synergetic acquisitions. What we add when we acquire a company is typically talk about that we try to add two things. We try to add energy and we try to add structure to the companies that we acquire. And that means that these companies have, as said, they've been owned by maybe the same type family for generations. Fair to say some of them have been sort of, yeah, they're very accustomed to running their business. They know everything about the business.

16:20Jörgen Wigh:they don't have the full sort of control. They don't have this follow-up systems that might be modern or necessary for the company. They know it by heart. So it's not like it's overstructured and we can maybe follow up. And there's usually some key dimensions of the company that we find that we can improve. It might be inventory control or it might be that we think they can do better in pricing or different aspects of the business. So what we also add then is energy. We add sort of ambition to the company. We would like the company to grow. Many of the companies may have been addressing a domestic market.

16:54Jörgen Wigh:They feel that they have had a good dividend from the company. It's been going on for years and they're getting a good dividend. They are someone in their community. They're really appreciated by the community, by the workforce. But they have not been overly ambitious in terms of growing. Sometimes we set up that they should grow for a new market or new geography, or it might be that they address a new segment. Lots of happening in different segments. Electrification is happening all over the world. The green transition is happening. We are investing quite a lot more into defense. So some of our companies are looking into that.

17:26Jörgen Wigh:Or we might find other opportunities. AI might be something that we add to the company that has not been there before. So we add ambition, we add energy and drive it through that. But we usually do it in combination with also keeping what is very good with the company. It might be the management team. It might sort of be someone in the family that can be part of the local board and work together with the former owners. Operational optimization and then also reviewing the strategy. If there's a different lens in looking at that. When you say structure, it's kind of the energy. You're like taking the initiatives and organically improving the business.

18:05How about elements of structure? I'm still like, I'm trying to like buy into this because I'm so used to talking to PE firms where you can build a conglomerate of businesses. That model is dead. You have to have some strong synergy drivers. You got to really figure out where you're doing a consolidation play and you're eliminating a bunch of costs or something. I feel like that's the normal. You're not doing that.

18:28Jörgen Wigh:I'm doing a bit of the opposite actually. The structure, it comes from, for instance, we put together like a reporting system that we put into place, following up closely on order intake in each company. So we are getting order intake every week from our companies. We're doing a simplified P &L and balance sheet every month. Then we do a full P &L and balance sheet every quarter. We are following out on cash flow and cash flow tighter than they have been most times. and that means that we also are better maybe to create the early warning system and adjust the company or the resources of the company when needed if they are either growing or that they say some slowdown in the market.

19:08Jörgen Wigh:We are more agile in that sense. We also, of course, try to bring interesting people on the board so that we can really drive growth and open some doors or get the company going in new markets. It's a lot around structure. We're also providing some sales trainings for their salespeople. And so we gather people from our companies to do some sales trainings. Many companies have been doing this in a really good way. But again, we try to make them great and improve a little bit more in all dimensions. And that pays off. There's some templates you can apply across, like the reporting and really understanding these metrics.

19:43And then you may find some resources. Here's a sales consulting group that had a big win. and we can introduce that across some of these other companies as well. How do you sell this concept when you go to a company and you're looking to acquire them? I'm sure these days it's easy to make when you decide to sell to make it competitive. First of all, if you look at your deals, you've done about 85 deals. When you look at deals you've done as proprietary deals versus deals that were through a broker or some kind of auction process, what does that split look like and has that sort of evolved over time?

20:17Jörgen Wigh:You need to sort of elaborate a little bit on that and put some nuances to that discussion. What we're doing is that we build an internal database of all the companies that we find interesting. And in the markets where we've been for a long time, like in the Nordics or bigger parts of Northern Europe, we're getting known along the way because we use those ideas to get out and talk to people. And that is outbound. That is where we've searched for companies, find companies, meet with companies. And sometimes we say that we drink a lot of coffee here. We're out there drinking coffee with people and having a coffee here and there and meeting with people.

20:51Jörgen Wigh:But then most times when we go out there, the companies that we approach are not for sale. They are not in the sales phase at all. They might imagine selling the company in 10 years or five years or whatever. But eventually they get to a point where they would like to see what the market value of the company is or where they should go. And what they do then is usually they contact some type of advisor, some type of broker, someone that helps them with. This is the first time they're doing this. So normally they have someone. The first thing the broker does is to make a list of potential buyers of the companies.

21:22Jörgen Wigh:And then they highlight us that we've had good discussions with Logite Grounds for many years. They could be a potential buyer for this. But they still don't want to go direct with us. They still want some type of competitiveness into the process. 70 % or so of the companies that we meet have some type of advisor at their side. But it's not purely competitive all the way through. And it's not like for bigger companies, you're looking at more of an auction type process. That the auction is carrying on all the way until someone signs the deal. With this small, because that's also important to understand, we're looking at fairly small companies.

21:59Jörgen Wigh:And that means that everyone cannot spend that type of amount of money and time looking at an auction like this. What happens is that we would like to be exclusive much earlier. We would like to be sure, okay, we like each other. We like the price we're discussing, both of us. So let's try to get somewhere. And if we don't get through, then they can go out to sell the company to someone else at a later stage. But let's spend six weeks or two months or so together to make sure to see whether we can find one another all the way through the process. And that's how we run the M &A.