Acquisition process
Lagercrantz is an attractive partner for entrepreneurs and family-owned companies that are looking for a long-term, stable and committed owner for their life’s work.
The ambition is to together further develop what the founders and former owners have built. Something that is often valued with Lagercrantz as a new owner is the decentralised model with a high degree of independence and access to an active network of experienced entrepreneurs and leaders, as well as support in areas such as internationalisation, digitalisation, pricing and sales management.
The acquisition process is also based on a decentralised model in which divisions and subsidiaries are given a great deal of responsibility early on. It broadly consists of four stages: initial contact, deal, integration and refinement – which are briefly described below.
Initial contact
Divisions and subsidiaries identify acquisition candidates through, for example, trade fairs, database searches and outreach activities. Relationships are maintained on an ongoing basis with a number of interesting companies – often long before a change of ownership becomes relevant.
Examples of what is valued in potential acquisitions;
- The focus is on acquiring successful product companies in profitable niches that own the rights to their products. Whether they also manufacture their products is secondary. There is also an interest in profitable distributors with a unique position and the ability to charge well for their value creation.
- It is important that the company is sustainable in the long term – both in how its products are used by end customers and in how they are produced. Challenges are accepted if a feasible plan can be developed for how they can be addressed.
- Annual revenue is normally between MSEK 40 to MSEK 400, with a historically proven EBIT margin of >15%. Smaller companies than this can be of interest as add-on acquisitions to existing businesses.
- Most are family-owned businesses, with owners that are looking for a reliable long-term partner. The company’s products are often leading in the domestic market with further growth potential through continued development of the domestic market or efforts in relation to exports.
- In addition to acquisitions of new independent companies, add-on acquisitions are also made to existing businesses, often to complement products or strengthen the presence in an important market.
Lagercrantz adheres relatively strictly to the above criteria and in how companies are valued prior to an acquisition – a strategy that has contributed to higher margins, increased profitability and improved return on capital.
Deal
When contact is made with a suitable company and there is mutual interest, discussions begin about the price and terms. As an acquisition involves a lot of work and costs for both parties, exclusivity is normally required before Lagercrantz goes any further. After an agreement is reached, a review/inspection of the company (due diligence) begins, where market position, finances, sustainability aspects, and legal conditions are examined. In parallel, a business plan is developed together with the company’s management to reach a consensus on the priorities for the next few years with Lagercrantz as owner. The people from Lagercrantz divisions who lead the work and have learned about the company are usually appointed as representatives on the company’s board after the acquisition is completed.
Integration
Lagercrantz believes in decentralisation with independent companies that have freedom subject to accountability. Because the companies acquired are already successful, drastic changes are rarely made. However, the fact that Lagercrantz is a listed company often means slightly increased reporting requirements.
Refinement
Acquired companies are offered a smorgasbord of support and resources in areas such as international expansion, digitalisation, sales management, pricing, inventory optimisation and add-on acquisitions. Network meetings and joint activities promote the exchange of experience, and good examples within the Group are highlighted. This creates a collegial environment where the companies thrive and develop.
