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Build and buy part 1…
Posted on February 5, 2007 by Richard Beddard
Filed Under Investing |
Just discovered The Bottom Line. It’s the BBC’s economics editor Evan Davis‘ weekly business discussion show on Radio 4. On Saturday he was talking to Zach Miles, chief executive of Vedior the employment agency that owns Select, and two other company bosses.
Vedior is interesting because it has grown partly by taking over 50 companies in 10 years - a strategy not always favoured by investors.
By coincidence, while listening to the show I was researching Imprint (IMP), a much smaller recruitment group with an outwardly similar ‘build and buy‘ strategy. One of the things that interests me about Imprint is that its chairman, Pierce Casey, was formerly a director of DCC (DCC). DCC is making an artform out of smaller ‘bolt-on’ acquisitions.
Investors have learned to treat acquisitive companies with suspicion but DCC and Vedior may demonstrate that’s not always justified. Although Vedior has done less well than the Amsterdam Stock Exchange, where it is listed, over the last ten years it has done better since Mr Miles took charge. DCC has trounced the FTSE.
In the programme Mr Miles described his approach as perhaps “a little bit different”, because typically Vedior:
- buys small companies at an early stage of development
- keeps the management on, and
- provides finance, expertise, and access to resources from the rest of the group.
He says:
One of the key elements of our strategy has been, when we acquire companies we don’t acquire 100%. We’re very keen for the management team to retain a worthwhile equity stake in the business and being given a lot of freedom about how they develop it.
As always with the BBC you can ‘listen again‘.
Footnotes:
- For an example of a debt-fuelled acquisitive company apparently unravelling, take a look at Torex Retail (TRX), and Edmond Jackson’s, write up on Interactive Investor today.
- I’m planning to look in more depth at what makes a good acquisition, and when acquisitions go wrong. That’s why this is part 1
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