Far From The Finishing Post

Oddbjørn Dybvad (REQ Capital) - Acquisition-driven Compounders

12 snips
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.
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INSIGHT

Power of Acquisition-Driven Compounders

  • Acquisition-driven compounders diversify across many products, clients, and markets to reduce single exposure risk.
  • They reinvest 70-100% of free cash flow at returns above 20% for decades, creating substantial value.
ANECDOTE

Swedish Acquisition Culture

  • Sweden has a strong tradition of successful acquisition-driven compounders, rooted in culture and history.
  • Swedish companies are expanding acquisitions beyond Scandinavia, like entering the UK market with small, high-margin firms.
INSIGHT

Defining Acquisition Compounders

  • Acquisition-driven compounders excel at using strong free cash flow to buy small private companies at attractive multiples.
  • Preference lies with generalist companies investing across sectors over specialists or aggressive roll-ups funded by debt.
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