Thank you so much! For me it's a long-term journey and in my opinion a very good point in time to have a look at the business. I hope that they will generate 25%+ EBITA margin in 10 years from now (if they continue to acquire these high-margin businesses they should be able to do so). Everyone will look back then and say "you were right". But my opinion doesn't matter at all. It all comes down to execution by management, especially for such small companies.
"To start out, maybe just answer the last bit of the question first. Yes. Due to the fact that we've been around for longer and we've done more business deals, which more people know us. And it's fantastic to get approached by a potential vendor because of word of mouth and that they talk to people that liked how we do business. But over the years, since we started in 2006, depending on where we are and who we are, I should say the deal flow has been from different sources. In the beginning, no one knew about us. We were very small, and we had to do more or less cold calling to approach potential sellers or companies or entrepreneurs.
After a few years, some of the Swedish brokers knew about us and sent us business deals. We found some good companies there. But when we started out, it was necessary and fun to learn how to approach potential entrepreneurs or sellers, just actively from ourselves. And that is a tradition, maybe not a tradition, but that is a way of working that Daniel also likes. So he's been doing a lot of that from the day he started here back in January of 2021, just to reach out actively to companies that we really like looking at and that have performed really well historically. Then with Daniel's courage and business drive, we jumped outside Sweden and started doing acquisitions 4 years ago.
And the transparency from what you can find in, in, financial history is much more limited outside of Sweden, which means that it's much harder to just be actively reaching out or cold calling companies because you know very little about them, who's owning them, what are the earnings, and whatever. Here in Sweden, you can find all that, so it's much more easier. So what we've been doing in, in primarily the UK, is that we found really good partners or, good, strong relationship with, with, with some, business deal brokers that knows who we are. They like us, we like them, and they find us more and more Teqnion companies to look at, and, and the people that they strongly believe could fit into our culture and our, our environment.
So the business deal from abroad is mainly driven by brokers, but more and more as the second part of the question was asked, also nowadays by word of mouth, that someone knows someone that sold a company to us, and they also like what they heard about that, and they also contact us in order to see if we're interested in their company, which is fantastic, of course."
How I have interpret it: Teqnion doesn't pay for a buy side broker. The brokers are supporting the seller and know Teqnion and reach out to them. So, Teqnion itself doesn't use (pay for) a broker.
Here are a few additional points I felt were missing from the piece, along with a few questions I have:
1. Inventory has increased by 50% since 2020 and by around 30% since the IPO, so "product" isn't selling as well as before. As DIO has increased gradually, this isn't due to the acquisition of a couple of companies.
2. Since inventory has increased, cash conversion has effectively increased as well: from 77 in 2019 to ~110 now. They are tying up cash longer, may face higher interest costs, or have less operational flexibility.
2.1. "[…] why cash conversion is repeatedly emphasized as a core filter". Looking at the data, does such emphasis exit?
3. GP/A has fallen by 50% since 2017 (Verdad wrote a good post about GP/A). How does this development fit in with your thesis?
4. "[…] focus on higher-quality companies with stronger earnings and cash flow, niche offerings, real pricing power, and margins above the group average." - I find it surprising that management is emphasising this now, although Munger has been saying this for decades.
5. "[…] intention to “constantly improve” the quality of acquired companies." - I miss a paragraph about the role of organic growth. How much does management care about it?
6. Where did you get the subsidiary's financials from, with such detail?
7. I understand that your 'momentum' is the main storyline, but it would have been good to read about potential downsides (e.g. not being active in a specific niche makes it harder for management to guesttimate a company's 'moat').
thank you so much for your feedback and your questions and the effort you put in. I can tell you really took some time to go through my analysis. I highly appreciate that!
1. I’m not sure where you’re getting the 50%/30% from — I’m arriving at different numbers. In any case, the absolute increase isn’t very meaningful because revenue has grown as well. I’m not concerned. For 2025, I get a DIO of 56 days (using average inventory), which is only slightly higher than 2016 and 2018 (~54 days) and clearly below 2023 and 2024 (>60 days). Total working capital as a percentage of sales is 22% in 2025, which is essentially in line with the 2015–2025 average.
2. Which data do you mean? They are trying to acquire companies where, over a longer period, profit ≈ FCF. Individual years can of course look better or worse — especially due to timing effects in working capital — but on a cumulative 5-year basis, profit should broadly match FCF and thus “pay back” the purchase price (a 5-year payback).
3. Honestly, I’ve never calculated that metric before, and I don’t fully see the informational value yet.
4. Not everyone is Munger 😊 From 2009–2021, management essentially consisted only of a CEO and CFO — and the CEO is very much a “learning by doing” guy. I wouldn’t say they only now started trying to buy better companies. For many years they relied on internally generated cash for M&A and didn’t raise external capital, which only changed in 2018/2019 with the private placement/IPO. After that, they unfortunately made a few mistakes and acquired overly cyclical businesses. They want to avoid that going forward and buy meaningfully higher-margin companies now. I would add as well that I assume that Daniel had a very significant impact on adjusting the M&A bar.
5. Based on my rough calculations, ~12% of growth from 2013–2025 came organically and 88% came from M&A. Average organic growth was ~5% p.a., but I’d argue that’s somewhat inflated by price effects (inflation in 2022). My expectation is that the newer acquisitions will, on average, grow a bit faster organically. That said, organic growth won’t be the core driver of returns going forward.
6. For the Swedish subsidiaries, the last 9–10 separate financial statements can be accessed on hitta.se for free. The UK acquisitions come with a disclosure limitation unfortunately: the income statement isn’t disclosed.
7. Don’t get me wrong — I’m not a short-term catalyst trader. I see Teqnion at a fundamental inflection point that’s gaining momentum and could symbolically unlock a new “dimension” of growth, similar to what Lagercrantz did ~15 years ago. I’m not focused on how the next quarter turns out, but on the big picture. And to me, not being in a specific niche is not a downside. Sector-agnostic serial acquirers often have better targets because they aren’t tied to one specific industry / megatrend. Compare the development of Lifco’s Dental segment with System Solutions (the sector-agnostic part of Lifco). It’s not a coincidence that Röko was set up as a sector-agnostic serial acquirer by Lifco’s former CEO.
Exactly. Usually that goes hand in hand, but not currently as they give up some unprofitable products/business lines (compare my update that I posted today). But usually organic earnings growth = organic revenue growth. And M&A will be the main contributor going forward, but I still expect the newly acquired companies to grow a bit more organically over the mid- to long-term.
Perhaps one of the reasons that Lagercrantz focused on/bought higher margin businesses is that margins have increased across the board.
I remember looking at an EU small cap that wasn’t able to make money between 1998 and 2011. They saw three or four CEOs come and go until, around 2011/12, their products suddenly started selling. As far as I can remember, their products hardly changed.
The 50 % or 30 % data points, respectively, come from S&P CapIQ.
Well, the point is this:
Revenue growth should lower DIO unless inventory rises faster than COGS growth.
This typically signals inventory buildup outpacing sales growth, often from aggressive stocking or supply issues. This offsets the positive turnover effect from higher revenue (via larger COGS denominator), tying up cash despite top-line gains.
Hey Alexander, a fascinating read! My takeaway quote: "2025 is the most interesting year in the dataset because Teqnion paid one of the lowest multiples in recent years while acquiring higher-quality subsidiaries with a better margin profile."
I am still curious however of some of the stories which came out in the past years: you mentioned the CFO carrousel, but there was also the COO departing without any communication to shareholders, as well as the incoming CEO of subsidiary Eloflex not having any business credentials. Would love to get your insights here!
Thanks Jens — really appreciate you reading it (and love that takeaway quote).
On the “stories” from the last few years: I agree those are the right things to scrutinize, because Teqnion is ultimately a people-and-process compounding machine.
COO departure without communication: Totally fair point — the lack of transparency is what makes it uncomfortable. Departures happen for many reasons, but when there’s no explanation, investors are left making guesses, and that causes uncertainty. I treat it similarly: not automatically thesis-breaking, but it increases the “trust discount” until management’s communication improves or the operating execution clearly re-stabilizes.
Eloflex CEO: I’ve seen the discussion. My honest answer is: I don’t have enough verified information to claim anything definitive about the individual. I’d watch the observable outcomes when the financial statements are released: Eloflex organic growth + EBITA + margins.
Excellent comprehensive write up. I agree with your thoughts. thank you for the eeffort!
Thank you so much! For me it's a long-term journey and in my opinion a very good point in time to have a look at the business. I hope that they will generate 25%+ EBITA margin in 10 years from now (if they continue to acquire these high-margin businesses they should be able to do so). Everyone will look back then and say "you were right". But my opinion doesn't matter at all. It all comes down to execution by management, especially for such small companies.
> In newer markets (like the UK), Teqnion has leaned more on broker relationships after learning that cold outreach alone can be too slow.
As per Daniel’s comment in the last AR commentary, mgmt doesn’t use brokers.
I disagree.
2025 Q4 earnings call:
"To start out, maybe just answer the last bit of the question first. Yes. Due to the fact that we've been around for longer and we've done more business deals, which more people know us. And it's fantastic to get approached by a potential vendor because of word of mouth and that they talk to people that liked how we do business. But over the years, since we started in 2006, depending on where we are and who we are, I should say the deal flow has been from different sources. In the beginning, no one knew about us. We were very small, and we had to do more or less cold calling to approach potential sellers or companies or entrepreneurs.
After a few years, some of the Swedish brokers knew about us and sent us business deals. We found some good companies there. But when we started out, it was necessary and fun to learn how to approach potential entrepreneurs or sellers, just actively from ourselves. And that is a tradition, maybe not a tradition, but that is a way of working that Daniel also likes. So he's been doing a lot of that from the day he started here back in January of 2021, just to reach out actively to companies that we really like looking at and that have performed really well historically. Then with Daniel's courage and business drive, we jumped outside Sweden and started doing acquisitions 4 years ago.
And the transparency from what you can find in, in, financial history is much more limited outside of Sweden, which means that it's much harder to just be actively reaching out or cold calling companies because you know very little about them, who's owning them, what are the earnings, and whatever. Here in Sweden, you can find all that, so it's much more easier. So what we've been doing in, in primarily the UK, is that we found really good partners or, good, strong relationship with, with, with some, business deal brokers that knows who we are. They like us, we like them, and they find us more and more Teqnion companies to look at, and, and the people that they strongly believe could fit into our culture and our, our environment.
So the business deal from abroad is mainly driven by brokers, but more and more as the second part of the question was asked, also nowadays by word of mouth, that someone knows someone that sold a company to us, and they also like what they heard about that, and they also contact us in order to see if we're interested in their company, which is fantastic, of course."
Interesting. So, how come Daniel said on the YT video that they don’t use brokers? Perhaps it was more nuanced and I should go back and listen again.
Thanks.
How I have interpret it: Teqnion doesn't pay for a buy side broker. The brokers are supporting the seller and know Teqnion and reach out to them. So, Teqnion itself doesn't use (pay for) a broker.
That makes sense!
Can you share the video please?
Good piece, Alex.
Here are a few additional points I felt were missing from the piece, along with a few questions I have:
1. Inventory has increased by 50% since 2020 and by around 30% since the IPO, so "product" isn't selling as well as before. As DIO has increased gradually, this isn't due to the acquisition of a couple of companies.
2. Since inventory has increased, cash conversion has effectively increased as well: from 77 in 2019 to ~110 now. They are tying up cash longer, may face higher interest costs, or have less operational flexibility.
2.1. "[…] why cash conversion is repeatedly emphasized as a core filter". Looking at the data, does such emphasis exit?
3. GP/A has fallen by 50% since 2017 (Verdad wrote a good post about GP/A). How does this development fit in with your thesis?
4. "[…] focus on higher-quality companies with stronger earnings and cash flow, niche offerings, real pricing power, and margins above the group average." - I find it surprising that management is emphasising this now, although Munger has been saying this for decades.
5. "[…] intention to “constantly improve” the quality of acquired companies." - I miss a paragraph about the role of organic growth. How much does management care about it?
6. Where did you get the subsidiary's financials from, with such detail?
7. I understand that your 'momentum' is the main storyline, but it would have been good to read about potential downsides (e.g. not being active in a specific niche makes it harder for management to guesttimate a company's 'moat').
Hi Mark,
thank you so much for your feedback and your questions and the effort you put in. I can tell you really took some time to go through my analysis. I highly appreciate that!
1. I’m not sure where you’re getting the 50%/30% from — I’m arriving at different numbers. In any case, the absolute increase isn’t very meaningful because revenue has grown as well. I’m not concerned. For 2025, I get a DIO of 56 days (using average inventory), which is only slightly higher than 2016 and 2018 (~54 days) and clearly below 2023 and 2024 (>60 days). Total working capital as a percentage of sales is 22% in 2025, which is essentially in line with the 2015–2025 average.
2. Which data do you mean? They are trying to acquire companies where, over a longer period, profit ≈ FCF. Individual years can of course look better or worse — especially due to timing effects in working capital — but on a cumulative 5-year basis, profit should broadly match FCF and thus “pay back” the purchase price (a 5-year payback).
3. Honestly, I’ve never calculated that metric before, and I don’t fully see the informational value yet.
4. Not everyone is Munger 😊 From 2009–2021, management essentially consisted only of a CEO and CFO — and the CEO is very much a “learning by doing” guy. I wouldn’t say they only now started trying to buy better companies. For many years they relied on internally generated cash for M&A and didn’t raise external capital, which only changed in 2018/2019 with the private placement/IPO. After that, they unfortunately made a few mistakes and acquired overly cyclical businesses. They want to avoid that going forward and buy meaningfully higher-margin companies now. I would add as well that I assume that Daniel had a very significant impact on adjusting the M&A bar.
5. Based on my rough calculations, ~12% of growth from 2013–2025 came organically and 88% came from M&A. Average organic growth was ~5% p.a., but I’d argue that’s somewhat inflated by price effects (inflation in 2022). My expectation is that the newer acquisitions will, on average, grow a bit faster organically. That said, organic growth won’t be the core driver of returns going forward.
6. For the Swedish subsidiaries, the last 9–10 separate financial statements can be accessed on hitta.se for free. The UK acquisitions come with a disclosure limitation unfortunately: the income statement isn’t disclosed.
7. Don’t get me wrong — I’m not a short-term catalyst trader. I see Teqnion at a fundamental inflection point that’s gaining momentum and could symbolically unlock a new “dimension” of growth, similar to what Lagercrantz did ~15 years ago. I’m not focused on how the next quarter turns out, but on the big picture. And to me, not being in a specific niche is not a downside. Sector-agnostic serial acquirers often have better targets because they aren’t tied to one specific industry / megatrend. Compare the development of Lifco’s Dental segment with System Solutions (the sector-agnostic part of Lifco). It’s not a coincidence that Röko was set up as a sector-agnostic serial acquirer by Lifco’s former CEO.
Regarding point 5, Johan wrote, as per your citation in the latest post:
“but it's the organic earnings growth that we're chasing and not primarily the top line.”
It might be a driver of returns to some degree. Organic growth may also come cheaper than acquisitions.
Exactly. Usually that goes hand in hand, but not currently as they give up some unprofitable products/business lines (compare my update that I posted today). But usually organic earnings growth = organic revenue growth. And M&A will be the main contributor going forward, but I still expect the newly acquired companies to grow a bit more organically over the mid- to long-term.
Regarding point 4, here is some food for thought:
Perhaps one of the reasons that Lagercrantz focused on/bought higher margin businesses is that margins have increased across the board.
I remember looking at an EU small cap that wasn’t able to make money between 1998 and 2011. They saw three or four CEOs come and go until, around 2011/12, their products suddenly started selling. As far as I can remember, their products hardly changed.
ROIC
before ~2011: below WACC for years
after ~2011: 30ish %
regarding 3, please see https://www.sciencedirect.com/science/article/abs/pii/S0304405X13000044. I cannot find the piece by Verdad.
The 50 % or 30 % data points, respectively, come from S&P CapIQ.
Well, the point is this:
Revenue growth should lower DIO unless inventory rises faster than COGS growth.
This typically signals inventory buildup outpacing sales growth, often from aggressive stocking or supply issues. This offsets the positive turnover effect from higher revenue (via larger COGS denominator), tying up cash despite top-line gains.
Hey Alexander, a fascinating read! My takeaway quote: "2025 is the most interesting year in the dataset because Teqnion paid one of the lowest multiples in recent years while acquiring higher-quality subsidiaries with a better margin profile."
I am still curious however of some of the stories which came out in the past years: you mentioned the CFO carrousel, but there was also the COO departing without any communication to shareholders, as well as the incoming CEO of subsidiary Eloflex not having any business credentials. Would love to get your insights here!
Thanks Jens — really appreciate you reading it (and love that takeaway quote).
On the “stories” from the last few years: I agree those are the right things to scrutinize, because Teqnion is ultimately a people-and-process compounding machine.
COO departure without communication: Totally fair point — the lack of transparency is what makes it uncomfortable. Departures happen for many reasons, but when there’s no explanation, investors are left making guesses, and that causes uncertainty. I treat it similarly: not automatically thesis-breaking, but it increases the “trust discount” until management’s communication improves or the operating execution clearly re-stabilizes.
Eloflex CEO: I’ve seen the discussion. My honest answer is: I don’t have enough verified information to claim anything definitive about the individual. I’d watch the observable outcomes when the financial statements are released: Eloflex organic growth + EBITA + margins.