Bergman & Beving

"Lifco: 21-bagger—33% CAGR since IPO in 2014. Indutrade: 50-bagger—22% CAGR since IPO in 2005. Bergman & Beving (including spin-offs): 7,500-bagger—20% CAGR since IPO in 1976. Lagercrantz: 120-bagger—23% CAGR since IPO in 2001. Addtech: 210-bagger—26% CAGR since IPO in 2001. Constellation Software: 375-bagger—37% CAGR since IPO in 2006. Heico: 1,100-bagger—22% CAGR since 1990. AMETEK: 175-bagger—16% CAGR since 1990. Judges Scientific: 115-bagger—24% CAGR since IPO in 2003."

"the eponymous founders of Bergman & Beving, always had a distinct focus on profitability. This focus remained when the company later pursued ambitious growth through acquisitions while adopting a profitability benchmark, which involved maintaining profits divided by working capital (P/WC) at levels exceeding 45%. Put simply, every dollar allocated to net working capital had to produce a return surpassing 45%, akin to the mindset behind Buffett’s $1 Test: “We test the wisdom of retaining earnings by assessing whether retention, over time, delivers shareholders at least $1 of market value for each $1 retained.”21 This target not only generated a self-sustaining business model that enhanced per-share value creation, but also provided resilience in"

"It led to the acquisition of Bergman & Beving’s MediTech business, a Nordic distributor of instruments and consumables in the life science sector. MediTech, with roots in Bergman & Beving going back to 1941, provided Addtech with steady, non-cyclical cash flows, and it operated with a decentralized structure. It was a relatively low-risk addition to the portfolio, despite accounting for around 25% of revenue. Roger Bergqvist was very disciplined on price and only paid a 6.5× earnings multiple. When the life science division was later spun off as AddLife in March 2016, it was listed at a market capitalization of nearly SEK 2.1bn ($210m). For Addtech shareholders, this translated into an 11× return over only 11 years—an impressive 28% CAGR."

"Tom Hedelius and Anders Börjesson, already major shareholders and key figures in its leadership, formalized their control over the company. They became the largest shareholders in Addtech, today holding 15.2% and 16.5% of the votes, respectively. Having Börjesson as a committed long-term owner—the key person behind Bergman & Beving’s successful acquisition strategy—ensured that there would not be any change of strategy, culture, or philosophy. The architect of decentralization would never centralize."

"The emphasis on P/WC follows a similar focus as the other independently operated companies from Bergman & Beving. This metric informs their acquisitions, product development efforts, variable compensation,"

"Addtech represented the original core industry business area of Bergman & Beving, and the name reflects the company’s original mission: to add value to its customers through expertise in technology. True to its philosophy of nurturing leaders from within, Addtech’s first CEO, Roger Bergqvist, was no stranger to the business."

"A deeply nurtured cash culture and simple profit goals sustained over decades—like the focus on profit over working capital (P/WC) that Bergman & Beving, Addtech, and Lagercrantz religiously adhere to—is essential for the model to work. It is the true differentiator between transactional players chasing “deals” and the compounders. The latter take a low-risk approach to growth and master the art of “building”—not just “buying.” These risk-mitigating characteristics built into the self-funding model explain why many of the compounders in this book boast multi-decade track records of uninterrupted compounding."

"Wigh led a strategic shift to ensure the company’s future success, focusing on acquiring product companies with intellectual property rights and extended product life cycles. This strategy not only afforded greater sales flexibility and higher margins but also retained outsourced production, optimizing returns on capital. Concurrently, the management team steered Lagercrantz back to its Bergman & Beving heritage, promoting decentralized decision-making to cultivate a more adaptive and responsive organizational structure. This holistic approach positioned the company for resilience and growth in a dynamic business landscape."

"The company she had bought shares in? Bergman & Beving. Along with two of its spin-offs—Addtech and Lagercrantz—it is one of nine extraordinary firms you will meet in the pages ahead. A $1,000 investment in 1976 would have increased to $7.5 million today—excluding all dividends received. It is far from the only company in this book to have delivered such outstanding returns."

"Why use working capital instead of invested capital in the denominator? A trading or value-added distribution company, like those under Bergman & Beving, primarily relies on working capital rather than fixed assets, which are often outsourced. Hence profit over working capital is a suitable proxy for asset-light companies and an adequate measure of overall capital return."

"Subsidiaries must adhere to a simplified return-on-capital metric that translates into a profit-to-working capital ratio of over 45% (P/WC >45%). In other words, for every dollar tied up in working capital, companies must consistently generate more than 45 cents of profit. The simplified ratio reflects Bergman & Beving of the 1980s and 90s."

"Beyond financial criteria, Söderlind’s plan was to focus on B2B companies with long histories, strong financial track records, and dominant positions in expanding niches. These companies are often asset-light, and when they grow, they produce a lot of cash flow. Companies have been acquired at multiples averaging 6–7× EBITA, demonstrating Söderlind’s discipline. But beyond numbers, the key is finding companies and leaders that align culturally with Bergman & Beving’s values, and want to stay committed post-acquisition."

"Even though Bergman & Beving does not micromanage its companies, it practices active ownership through the boards of the individual companies. These boards, which are composed primarily of individuals with current or former experience at Bergman & Beving, ensure that the culture and governance principles of the parent company are applied consistently across the entire group."

"The job of Bergman & Beving is not to run its companies, it is to obtain and retain people who continue to be passionate and excited even after selling their life’s work, and to empower and incentivize them to become even better. This is very different to the general perception of how companies should be governed, a world away from centralization and “management knows best.” Out of 1,400 employees, only a handful are employed at HQ."

"A key element in fostering this culture is its internal book, Idea and Soul, a legacy from Bergman & Beving. Given to employees who complete its internal business school, the book lays out the company’s core business principles in about 80 pages. The true emphasis of the book is on fundamental business principles and practical applications that drive business performance. A central theme is the…"