24 Jun · 49 min
Mikk opens by introducing Chris Rolls, founder of PieLAB Capital, a holding company with nine portfolio companies built through 13 acquisitions, and notes that he first contacted Chris three years earlier without a reply, that he later researched him, and that they met in Stockholm at a serial acquirer conference. Chris then recounts his background: he built and sold four businesses, the last being Rental Express in property management, and after selling it he wanted to invest rather than start again from zero. He had 20 or 30 meetings with Australian private equity firms before proposing to one principal that he fix two struggling businesses over 18 months to two years in exchange for being taught the private equity industry, which he calls his middle-aged work experience. He then started PieLAB, whose first fund mixed Series B growth technology investments with small-scale private equity assets, is almost fully exited and is expected to produce around a 25 percent IRR, structured to be effectively tax exempt for Australian investors. The closed-end structure forced him to sell good businesses, which led him to Constellation Software, TransDigm, Pieco and the Swedish serial acquirers, and to pivot PieLAB into a full-time serial acquirer.
On lessons from private equity, Chris says the investors he met were excellent at financial engineering but weak on day-to-day operations, illustrating this with a due diligence where eight salespeople all appeared to perform equally, until he found the two top salespeople were spreading leads across the team and one of them was selling the business. On private versus public markets, he says the number of US listed companies has roughly halved over 20 or 30 years, that private businesses are more numerous and can be diligenced in ways that would be insider trading for a public company, and that public buyers pay a liquidity premium, so private businesses are cheaper. He explains PieLAB's structure: an Australian proprietary limited company, not a trust, with 100 percent ownership of subsidiaries for tax consolidation, a ten-year horizon before a liquidity event, two tranches of capital raised and a third coming, and an expectation of an eventual listing.
Chris discusses Detector Inspector, Australia's largest smoke alarm and gas compliance company, and why PieLAB likes compliance businesses, which make up five or six of the nine portfolio companies. Detector Inspector sat in a legacy fund; PieLAB sold out of the fund but created a continuation fund and kept a minority interest, and also bought a smaller smoke alarm business cheaply. On value creation he sets out three levers: raising prices, cutting costs and selling more, arguing prices are the lever with the most control. He describes buying a Queensland strata management business at about seven times EBITDA from the estate of an elderly owner, where prices had not been raised for about eleven years; after raising them to market levels the effective multiple fell to around five times. On costs he covers online voting technology, working capital extraction of $400,000 from a $5m business, and AI work by Shelley, PieLAB's head of innovation, including automating invoice reconciliation and using tools like NotebookLM and Claude. He says selling more is the hardest lever, that revenue is a poor measure of growth, and discusses salesperson pay with Mikk.
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On capital allocation, Chris lists five uses of excess capital and says PieLAB usually prefers buying a fresh portfolio company, though it has done two strata management bolt-ons and three or four in total, and warns that cultural risk in bolt-ons is underestimated. He says he enjoys building and will run PieLAB well past the ten-year liquidity point, and he and Mikk close by discussing work-life harmony and his habit of reading business and investing books for pleasure.