This is Matt Reustle and today we are breaking down the Swedish industrial giant, Atlas Copco. With a market cap hovering around $50 billion US dollars, Atlas Copco is a dominant player in the air compressor and vacuum pump markets. It has returned 40x over the past 20 years for its shareholders and to break down the business I’m joined by Stephen Paice, Head of European equities at Baillie Gifford. Baillie Gifford has owned this business for 4 decades and Stephen still has the handwritten research notes from the mid-80s so we thought it was a proper fit.

We cover the rich corporate history, including how one family - the Wallenbergs (also referred to as the Swedish Rockefellers) - have played such a major role in the history, we get an overview of pneumatic energy and the importance of the air compressor market, and we explore what makes this corporate culture so noteworthy to both insiders and outsiders. Please enjoy this breakdown of Atlas Copco.

For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.

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Show Notes

[00:02:12] - [First question] - What makes Atlas Copco such an interesting business

[00:03:52] - What they’re selling and who they’re typically selling to

[00:06:02] - Whether or not there are alternatives to air compressors

[00:07:03] - What a vacuum pump is and how their industrial vacuum business works

[00:08:55] - Metrics used to measure how Atlas Copco is a market leader

[00:10:25] - Some of the key milestones of their corporate history leading up to today

[00:17:51] - How much the Wallenberg family owns of Atlas Copco today

[00:18:48] - Walking through the income statement

[00:21:47] - Service regularity and overview of revenue generated through service

[00:25:35] - Cost profile of the business and how their supply chain works

[00:30:19] - Anything unique that contributes to their 6-7% revenue growth

[00:31:55] - What the consolidated business margin works out to

[00:33:23] - TransDigm; Being able to allocate 30-40% of free cash flow towards acquisitions in a fragmented market

[00:35:16] - What the bull case for Atlas Copco is

[00:39:46] - A metric he typically uses when thinking about these types of businesses

[00:40:47] - The most interesting and surprising takeaways from Atlas Copco

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