LIFCO At A Glance

A serial acquirer at the top of its game.

Feb 15, 2023

∙ Paid

Disclaimer: This article is for informational & educational purposes only. Nothing I mention below is financial advice. Do your own research & speak to a financial advisor before making any investment decisions. Stock prices and market value have probably changed since this article was written. This is analysis is NOT a buy or sell recommendation.

LIFCO is an industrial holding company with a proven M&A flywheel.

Yes, today we are looking at another top-notch serial acquirer that has already gone 100x, but I think is still an important business to understand. It still has a long runway. Additionally, the former CEO who captured the 100x is no longer with the business but has created a new one you might want to keep on your radar.

“Lifco’s primary goal is to increase its earnings every year through organic growth as well as acquisitions.” - CEO Per Waldemarson, 2022 Annual.

As one of the best acquirers out there, Mark Leonard says organic growth is very important:

“Organic growth is, to my mind, the toughest management challenge in a software company, but potentially the most rewarding. The feedback cycle is very long, so experience and wisdom accrete at painfully slow rates.”

Luckily for LIFCO, they aren’t a SaaS business. They can get very quick feedback on organic growth. And they’ve done a great job of it.

LIFCO is separated into 3 distance segments.

Dental
Demolition & Tools
Systems Solutions

Each of these segments contributes to LIFCO’s top and bottom lines. LIFCO’s business model is to continuously acquire niche businesses in one of these segments. As they continue buying up more businesses, their organic growth and growth through acquisitions continue powering the business to buy more great niche businesses.

LIFCO has many of the characteristics I look for in a great serial acquirer:

Commitment to acquisitions. They commit to the businesses they buy and aren’t involved in altering the company culture and operations in order to increase its value to sell it to someone else.
Look for highly motivated managers. They want managers who are motivated to keep the business improving. They also want managers who don’t need too much hand-holding and can function independently.
Decentralized business model. As mentioned above, they keep the company culture intact. The business gets to create its own strategies and execute them without micromanaging from the top.
Stability of growth and profitability. LIFCO wants businesses that have stability. They have a debt range they are trying to stay in, which is quite conservative.
Long-term employees. LIFCO thinks long-term and therefore keeping employee turnover is a second-order effect. Businesses with great employee retention are a good proxy for happy employees. You should look for happy employees, as that can help with keeping the business operating at high levels.
Cash flow generative. Since 2013 Free Cash Flow has been compounding at 20%. This indicates that the business has some intriguing competitive advantages and that they seem to be improving over time.

LIFCO has a Europe-centred demographic.

They have expanded to APAC and North America, but that still makes up a very tiny percent of their footprint.

Let’s go over each of their segments in a little more detail.

LIFCO Segments

Dental

The dental segment currently makes up 21% of its EBITA.

The dental segment includes:

Manufacturing
Distribution
Prosthetics
Sofware

LIFCO is a supplier of the highly attractive consumables market for dental. Consumables are great because they provide the supplier with a steady recurring income. They also sell equipment, technical services, and dental technologies. Most of these products are sold directly to dentists.

In terms of manufacturing, they produce denture attachments, disinfectants, saliva injectors and other dental products.

This segment is attractive, as the dental industry is not very cyclical. So a decrease in market cycles shouldn’t have too large of an effect on operations.

The ability for multiple businesses in the dental areas also offers interesting scale opportunities. For instance, different businesses inside the company can take advantage of LIFCO’s larger size to help with