00:40:52 · Mikk
[00:40:52] S0: Chris, when it comes to creating value, we cover three things. Increasing the prices, trying to reduce the cost, and number three was just simply selling more products and services. But there is one more. There is those add on bolt on acquisitions. How big of a fan of this are you and how many of those have you you done when it comes to portfolio companies and and growing them?
00:41:16 · Chris Rolls
[00:41:16] S1: Yeah. We haven't done many. It's not... I mean, when you think about it as as an investor, as a capital allocator, there's a handful of things that you can you can do when you have excess capital. I mean, you can return it to shareholders as a dividend. You can turn it to shareholders as a share buyback. You can make an acquisition or you can so make a fresh acquisition. So for us, a whole new portfolio company. You can buy a bolt on or you can invest in the growth of your of your portfolio companies, maybe putting more sales people on them. And they're really give or take a bit. They're your five options. And of course, you know, what you wanna do is focus on the one that gets you that the highest return on capital. So on the assumption that we can get a higher return on capital than our shareholders can, then we don't pay it out as a dividend and we don't. You know, so what is the best return on capital? Usually for us, usually, it's buying a whole fresh new portfolio company. And so that is generally our preference. But every now and then, the opportunity comes for a bolt ons, bolt something into an existing business and we've done that once again and we've we've used the strata management industry as an example. We've made two bolt on acquisitions in that space. And that's because the small businesses go for very low multiples. So you're buying those at a very low multiple which means your return on capital is high. And the reason they're low is because a very small strata management business doesn't make any profit. But if you effectively buy that business and what you're buying is the contracts to manage a strata management business and you put it into a business that is already operating, you can very often eliminate a lot of the cost of that and the revenue, a high proportion of revenue goes straight to the bottom line. So they're very value accretive acquisitions. But they're not without risk. And one of the things that is always, in my view under underestimated is the is the... You you assume that you're gonna make these... Have these synergies and what is underestimated is the risk. And in particular, cultural risk. Are the people in the business that you're buying gonna fit in with the people in the business that you're you're merging into? And if the answer is no, it can be a very expensive exercise.
00:43:25 · Chris Rolls, Mikk
So I look at them and say, a bolt on acquisition can be quite risky because you're faced with that that that the the cultural risk of merging the businesses together. But we've done a few. We've done... We've done three or four of them. [00:43:38] S0: Now when it comes to this building this long term holding company, obviously, lot of risk, lot of grind, lot of hard work. It takes twenty to thirty years. You mentioned maybe in in in the future doing an IPO. Now a bit like a personal question, like, do you sustain this energy and enthusiasm over such a long periods of time?
00:44:04 · Chris Rolls
[00:44:04] S1: Oh, it's a good question. I think think I just like it. It's fun. Now, it's not always fun. But I really enjoy creating something. I really enjoy building something from scratch. It's not... It's it's certainly not just about financial reward. Although, if you do a good job, you can generate financial reward. I also do it because it allows me to invest my own capital in a way that I think is relatively low risk in relation to the return. It's certainly a lot less risky than private equity or venture capital because we're buying businesses at lower prices, we're putting less debt in, they are much safer businesses to invest in. But it's no different to running any business. You have the ups and downs and not everything goes according to plan. But over life as a business owner, you just get used to that. And you always know that nothing is ever as good or as bad as it seems. So when things are not going well, can seem like it's the end of the world, eventually you turn them around. If you just keep going, keep making good decisions, keep trying to improve everything, keep hiring better and better people, keep moving out the people that aren't performing, if you just do that every day, you know, one step at a time, my experience is you almost always generate good results. The issue that most people have is that two things. One, they're not willing to learn from the mistakes they make. And we've made mistakes and we've learned from them. But I think the second one is the persistence. I looked at this and sort of said, Well, we promised our investors this is a ten year time frame. I look at this and go, Well, the point that we create liquidity, that's just the start of the next ten years. So I'll be doing this for a very long time. Well past that ten year liquidity, you know, period.
00:46:06 · Mikk
[00:46:06] S0: Now a lot of people, especially I think the younger ones, are are talking about building those companies and they're sometimes talking about the word balance. But me and my my one of my mates, like you say in Australia, have discussed that the better word is probably a harmony where work, family, curiosity, friendship, and ambition all become integrated into one life. So what else what else do you do? So how do you think about this?
00:46:33 · Chris Rolls
[00:46:33] S1: I tend to agree. Think... Look, this is probably gonna sound politically incorrect, but there's not that many people that are successful in business that haven't worked really hard, you know, and I think I think that's just a fact. I work hard, but what what enables me to do it is that I enjoy doing it. So it's my it's my hobby. Like when I'm when I'm at home on the weekend and I'm reading a book, I'm not... I'm I'm reading a book about business because it's something that interests me or investing or, you know, maybe maybe a biography on a business figure or an investor. And I'm doing it because I enjoy learning. And so, you know, the whole concept of work life balance is important, but it's also hard if you don't like what you do. And if you do like what you do, working hard is much easier. So I sort of... I I don't struggle with it because I've spent my whole life doing things I want to do because that's the advantage you have when you're an entrepreneur and you're making things happen. So don't struggle with it at all but I'm probably lucky because it's a natural personal interest of mine. And even if I wasn't working, if I had no job, I would still be reading those same books and I'd still be looking at businesses that popped up online to buy. I just can't help myself. That's what I would do.