Acquisitions are an important part of Lagercrantz Group’s growth strategy. The strategic target group of possible acquisition targets is broad in the interest of raising the rate of growth. The ambition is to grow into new technology areas, and to acquire three to five companies on average per year.
PROCESS
Interesting complementary acquisitions are identified by the subsidiaries; acquisitions to broaden a division’s operations are dealt with at the division level, whereas larger strategic acquisitions are handled by the management of Lagercrantz Group. Two persons in the Group devote their time to acquisition issues. Making successful acquisitions requires a well-structured process to identify, evaluate and consummate corporate acquisitions. Lagercrantz Group works with a process that consists of five phases:
- Identifying potential target companies based on different strategic perspectives and financial key ratios.
- Contact with companies and their owners, clarifying idea, prerequisites, purpose and common grounds.
- Analysis of market and company, drawing up a business plan and negotiating the terms.
- Final negotiations, quality assurance, contract of sale and press release.
- Closing, implementation of business plan, introduction of governance and reporting, and information to employees, customers and suppliers.
The subsidiaries in the Group have a very important function, especially in contacts and the initial evaluation thanks to their local market knowledge. A growing number of potential target companies are identified via Lagercrantz Group’s subsidiaries.
TARGET COMPANIES
Businesses that Lagercrantz Group looks for are often entrepreneur-led companies. It is then important that the seller feels that the company ends up in the right environment and continues to have good opportunities for development. Lagercrantz Group offers a stable and financially strong platform in a decentralised organisation, with a large measure of freedom and a clear responsibility where the company often retains its name, location and organisation.
ACTIVITIES DURING THE YEAR
During the 2008/09 operating year two companies were acquired: CAD Kompagniet AS in Denmark, with the closing taking place 1 April 2008, and COBS AB in Gothenburg, with the closing taking place 1 September 2008. The level of activity was high at the beginning of the year with a number of parallel processes. As the state of the economy deteriorated, Lagercrantz chose to reduce the level of activity in the acquisition area. A number of dialogues are continuing, which creates opportunities to initiate processes quickly once the business situation stabilises. During the year the Group also strengthened its financial position, which resulted in an improved equity ratio and lower net liabilities. The Group’s basis for consummating acquisitions has been strengthened.
OUTLOOK
Lagercrantz Group sees good prospects for making acquisitions going forward and look for companies with a proven earnings record and good management. The geographic area is the Nordic Region in the first instance. Target companies should have a niche orientation and a strong market position within this niche. Lagercrantz Group’s contribution in the form of competence and development opportunities make it possible for acquired companies to continue the development.
