Buyers and Builders
00:19:59 · Mikk, Andrea Allegrini
[00:19:59] S0: Now you have done like 13 acquisitions in HVAC sector. How much... How is your sourcing process? Are now these days deals coming to you because there are a lot of sellers knowing that you are you are this player who are buying this type of businesses, or how how does it work... Your process work? Or do you need to do outreach? Or how how is it work? [00:20:21] S1: To date, it's basically word-of-mouth because, you know, those seller mainly when they are part of the same brand. They used to meet, for example, in events or conferences. So they talk they talk about Lindbergh. And so Lindbergh is somehow well known in these situations. And most of the deals came by word-of-mouth, which is really good because it's... It gives us also sort of standing so the seller can trust us because he has experience of a friend of that's already sold to us. So it's really good in this sense. Now I think that we are quite mature, so we need to keep this flywheel because it's important on one end. But on the other hand, we need to become a little more proactive because we want to exploit all the potential synergies that we can find at the local level in terms of operations and business. And so we are now making a proactive research of companies we want to build where we need them.
00:20:21 · Andrea Allegrini, Mikk
[00:20:21] S1: To date, it's basically word-of-mouth because, you know, those seller mainly when they are part of the same brand. They used to meet, for example, in events or conferences. So they talk they talk about Lindbergh. And so Lindbergh is somehow well known in these situations. And most of the deals came by word-of-mouth, which is really good because it's... It gives us also sort of standing so the seller can trust us because he has experience of a friend of that's already sold to us. So it's really good in this sense. Now I think that we are quite mature, so we need to keep this flywheel because it's important on one end. But on the other hand, we need to become a little more proactive because we want to exploit all the potential synergies that we can find at the local level in terms of operations and business. And so we are now making a proactive research of companies we want to build where we need them. [00:21:33] S0: Now when it comes to the acquisitions you've done so far, you mentioned smallest has been like 300,000, the largest one eight million. So it's a pretty large gap. So moving forward, do you see you still keep acquiring those small tiny tiny businesses with revenue less than 1,000,000? Or it's... It works for you because you can integrate them so well?
00:21:33 · Mikk, Andrea Allegrini
[00:21:33] S0: Now when it comes to the acquisitions you've done so far, you mentioned smallest has been like 300,000, the largest one eight million. So it's a pretty large gap. So moving forward, do you see you still keep acquiring those small tiny tiny businesses with revenue less than 1,000,000? Or it's... It works for you because you can integrate them so well? [00:21:54] S1: We like them a lot actually because they come at a low price and they gave e e... Above all, when you already have a company on the same territory, you can exploit lots of synergies. For example, we did an acquisition last year on the Adriatic Side of Italy. It was it's called Salvucci, and he was the local competitor of a company that we already had. And it was a company doing 1,000,000 turnover. So we bought it at a good price, and the integration was 100% managed by the local manager. So for us, it was maybe one of the best deal ever closed. So we merged them. We closed our house. We closed the offices of the company. We bought. We... And and now we basically are monopolist in that city. And this is a good strategy. So to go on building this local monopolist, maybe staying away from big cities like Milan or Rome, where you have high competition, price issues, while Italy is made of lots of little cities where you have lots of customary, mainly residential business in HVAC. And so if we are able to build these local little local monopolies, our strategy is it means it's working.
00:21:54 · Andrea Allegrini, Mikk
[00:21:54] S1: We like them a lot actually because they come at a low price and they gave e e... Above all, when you already have a company on the same territory, you can exploit lots of synergies. For example, we did an acquisition last year on the Adriatic Side of Italy. It was it's called Salvucci, and he was the local competitor of a company that we already had. And it was a company doing 1,000,000 turnover. So we bought it at a good price, and the integration was 100% managed by the local manager. So for us, it was maybe one of the best deal ever closed. So we merged them. We closed our house. We closed the offices of the company. We bought. We... And and now we basically are monopolist in that city. And this is a good strategy. So to go on building this local monopolist, maybe staying away from big cities like Milan or Rome, where you have high competition, price issues, while Italy is made of lots of little cities where you have lots of customary, mainly residential business in HVAC. And so if we are able to build these local little local monopolies, our strategy is it means it's working. [00:23:22] S0: When it comes to capital allocation and more specifically deal structures, you've done so many. Maybe you can summarize like what has been the acquisition multiple, the average one and how does the you said there is no earn out for the sellers. So can you share more of of of the deal structures?
00:23:22 · Mikk, Andrea Allegrini
[00:23:22] S0: When it comes to capital allocation and more specifically deal structures, you've done so many. Maybe you can summarize like what has been the acquisition multiple, the average one and how does the you said there is no earn out for the sellers. So can you share more of of of the deal structures? [00:23:39] S1: Okay. Today, didn't... We I have never did earn out because we bought companies from sellers willing to retire. So maybe in the future, if you are buying a company from a young guy willing to help us in our strategy, maybe he will jump on board. And in that case, could be that earn outs will be implemented. In average, we buy four, 4.5x EBITDA, plus net financial position added on top. And with that, we use also to deduct the severance, which is the biggest debt that those company have. But it's, as you know, it's a long term debt for workers, so it's not that important for us and we pay we have to pay 3040% upfront and the rest in two three four years if it's possible so that the cash generated by the operation can basically pay itself the deal. And this is really powerful. [00:24:40] S0: So the businesses asset light, debt free, cash conversion is high. What is your take when it comes to the capital allocation in a way that how much depth are you actually using when doing those deals, when structuring those deals?
00:24:40 · Mikk, Andrea Allegrini
[00:24:40] S0: So the businesses asset light, debt free, cash conversion is high. What is your take when it comes to the capital allocation in a way that how much depth are you actually using when doing those deals, when structuring those deals? [00:24:56] S1: Have a ratio between a net financial position and EBITDA, which is less than 1.5. So we can push a little bit more on the financial leverage. We have a very good standing with our banks. In general, we are not willing to raise any equity by doing capital increase because we have well written in our mind the per share concept, which is our mantra today. So we are not willing to dilute ourselves and our shareholders. And maybe we can add some... We can get some money, for example, by issuing some bonds, for example, but pure debt. So according to what we actually need because we are not asking or raising 10,000,000 if we don't have opportunities where those 10 millions can be spent. So it's always a matter of growing, but we prefer to grow slow to grow fast. So with no rush, we don't need to buy €10,000,000 EBITDA per year. We prefer to be, again, very prudent. And if a deal is not convincing us, we are not closing it. So prudence is our main approach today.