Far From The Finishing Post
Oddbjørn Dybvad (REQ Capital) - Acquisition-driven Compounders
Sep 11, 2023
In this episode, Oddbjørn Dybvad, co-founder of REQ Capital, discusses acquisition-driven compounders and their entrepreneurial energy. They explore the risk and return characteristics of these businesses, the influence of geography, and the benefits of decentralization and insider ownership. They also touch on motivating behavior through incentivization structures, the valuation differential between public and private markets, and evolving preferences for investing.
40:48
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Quick takeaways
- Acquisition-driven compounders generate strong free cash flows that are used to acquire small private firms, allowing them to redeploy capital at high returns on capital for extended periods.
- Generalist compounders, who acquire diverse businesses instead of specializing in specific sectors or geographies, enjoy the benefits of risk diversification and foster a decentralized structure that promotes entrepreneurship and autonomy within subsidiaries.
Deep dives
Investing in Acquisition-Driven Compounders
Opium Dabad, co-founder of REQ Capital, discusses the investment strategy of focusing on acquisition-driven compounders. These companies, often family or management-owned, generate strong free cash flows that are used to acquire small private firms. The appeal of these businesses lies in their ability to redeploy significant portions of their cash flows at high returns on capital for extended periods. The decentralized and diversified nature of these companies mitigates risks associated with single exposure, making them more resilient and adaptable. The podcast highlights successful examples of acquisition-driven compounders in Sweden and discusses their expansion into international markets.
