Double Profitability or Don't Enter

“The consistent, high returns that all venture capitalists and investors seek come from companies like Piab. Harald met his peer Jakob Tell at an event for young leaders. Jakob explained that his family had founded the company, which manufactures various types of vacuum pumps for industry, in the 1950s. But now they had decided to sell, as the family could not manage to take the business further on their own. Mix became curious and started digging into the numbers, what did the growth look like in the industry, “that’s crucial.” How competitive was Piab, how profitable? “Our question is always, even if things are going well, can it get even better? We don’t enter companies unless we believe we can double profitability within five years,” says Harald Mix. It ended with Altor buying 75 percent of Piab in 2006, of which a portion was sold to management, and the rest was retained by the Tell family. Between 2006 and 2011, the profit margin (profit as a share of revenue) increased from 10 to 27 percent. Piab is an example of how venture capitalists enter family businesses and raise growth and profitability targets, setting the bar higher than the family has managed to do, because a family that has everything they own in a company does not dare to bet and take risks in the same way.”

“Com Hem was founded in 1983 under the name “Televerket kabel-tv.” In 1999 the company got its current name, and in 2003 the loss-making operation was sold to EQT. When they took over, profits increased by 100 million kronor in just a few weeks simply because the new owners made sure the company contacted a group of suppliers and renegotiated the prices of the services they bought. No one had done that before. Things cost what they cost. But what especially increased the value was that EQT built and launched “triple play”: cable, broadband, and telephony in one service.”