Buyers and Builders
00:10:17 · Mikk, Andrea Allegrini
[00:10:17] S0: So it has been like a true evolution. So I'm trying to understand, how was the moment then? What did you see in the HVAC that made you realize that could be the next great chapter of the company when it comes to moving forward? [00:10:30] S1: Okay. The choice was made after a dinner with Mikkael. I can remember it very, very well because we used to talk with our customer number one in France, and we felt that he was talking with the... Our competitor. And so Mikkael said that I don't want to rely on one single customer. Lindbergh cannot rely on one single customer for the future. So sell... Let's sell France. And we decided it. It was, I think, July 2024. And in November, the deal was closed. We we sold to our main competitor, to the aggressive one. And... Because they they wanted to to make Lindbergh fall by taking the first customer of the group. And so, again, with a lot of pragmatism, we said, okay, let's give away the company no matter if we don't cash in the money we invested in the last years, but let's focus on HVAC. So we are not... We learn also not to be jealous of what we build. [00:11:39] S0: Okay. For for someone who has never studied the Italian HVAC market, Why is it such a attractive hunting ground, if we can say that? What what makes it so attractive for you? And and... Yeah. Give us an overview a bit, please.
00:11:39 · Mikk, Andrea Allegrini
[00:11:39] S0: Okay. For for someone who has never studied the Italian HVAC market, Why is it such a attractive hunting ground, if we can say that? What what makes it so attractive for you? And and... Yeah. Give us an overview a bit, please. [00:11:56] S1: Fragmentation is may... I think the the the main the main characteristics of this business. It's a business of EUR 12,000,000,000. I'm talking about installation and maintenance services, so no production and no distribution, with roughly 12,000 capital companies. So the average size is really, really small, plus more than 50,001 person companies. We call them artisan. And so this is point number one. Point number two is the... I think it's something that all the European companies are facing is the generational succession issue. So these companies are not finding someone or an industrial player willing to take over the company to grant continuity mainly when the salary is 60, 65, 70 years old. So he's really willing to to find a good... A permanent home for the people he he has worked with in the last decades. And so those two factors are a really good mix that bring us lots of opportunities in this in this sense, in terms of business, but also on the financial side. So good price and very good payment conditions.
00:11:56 · Andrea Allegrini, Mikk
[00:11:56] S1: Fragmentation is may... I think the the the main the main characteristics of this business. It's a business of EUR 12,000,000,000. I'm talking about installation and maintenance services, so no production and no distribution, with roughly 12,000 capital companies. So the average size is really, really small, plus more than 50,001 person companies. We call them artisan. And so this is point number one. Point number two is the... I think it's something that all the European companies are facing is the generational succession issue. So these companies are not finding someone or an industrial player willing to take over the company to grant continuity mainly when the salary is 60, 65, 70 years old. So he's really willing to to find a good... A permanent home for the people he he has worked with in the last decades. And so those two factors are a really good mix that bring us lots of opportunities in this in this sense, in terms of business, but also on the financial side. So good price and very good payment conditions. [00:13:17] S0: So there are a lot of those artisan businesses. So far, you've made 13 HVAC acquisitions. What has been the largest acquisition? What has been the smallest? And how is your overall thesis when it comes to those businesses? And has it changed over time? And maybe you can share, are you buying minority, majority? What is the structure there?
00:13:38 · Andrea Allegrini, Mikk
[00:13:38] S1: We always buy the majority, so 100% of the company. We don't do earn outs. So we just we just deal selling prices with the seller, and that's it. We discuss. And later, I think, we will talk about the payment condition. And but in general, so we buy the majority. The biggest one is EUR 8,000,000 turnover company closed in late twenty twenty five, while the smallest one was a 300,000 company. So today, I can say that our strategy is more like a sort of hub and spoke strategy. So if we want, for example, to enter a new region or a specific province, maybe in that case, we are buying a company with already a little structure for a company doing $4.05, 8,000,000 turnover. But right after, our work is to become attractive and to integrate all the smaller companies all around. For sure now, we are not focused on, yes, maybe we can buy a 300,000 turnover company, but it should be a bolt on acquisition with no effort from our side in terms of integration. So in that case, it's the local manager that we already of a company that we already own that must manage this kind of integration. And we did it in the past, and it's a very... We prefer this kind of acquisition rather than buying big companies, you know, also a matter of risk reduction. [00:15:08] S0: So what about the business owners? What about the post acquisition integration? Do they do they stay? For how long do they stay? And what have you seen over the past few years? Some guys still working with you or how has it been?
00:15:08 · Mikk, Andrea Allegrini
[00:15:08] S0: So what about the business owners? What about the post acquisition integration? Do they do they stay? For how long do they stay? And what have you seen over the past few years? Some guys still working with you or how has it been? [00:15:21] S1: Okay. Yep. Usually, we ask them to stay from one to couple of years, mainly to ensure as a smooth transition because we are not willing to rush. We are not willing to turn immediately those company upside down because we don't need to. It's not our intention. And mainly also because we ask the seller to train the local manager that we identify inside the company who will be the local manager helping us in building and implementing our industrial plan. I can say that in the cases where the seller has already left, in some case, the company is going better than before in terms of performances, organization of technician. And in that case, it's really a very good a very good signal that we choose the right person to take over the responsibility. [00:16:24] S0: So the group does today, like, 32,000,000 turn... Turnover. And interesting fact, you said it's growing 35 to 36% per year, which is pretty fascinating. The model, for sure, it works well. So I'm trying to understand, have you changed anything when it comes to acquisition number three and acquisition number 13, the last one you did? Like, what has changed and what have you learned maybe when it comes to looking at the businesses going forward from here?
00:16:53 · Andrea Allegrini, Mikk
[00:16:53] S1: I can say that our strategy, the main choose is to buy good companies. So, mean, Warren Buffett teach us that if you are not finding any good opportunity, maybe for one year, for a single year, you cannot even buy any one of them. So it's better to be prudent and pragmatic when it comes to opportunities. So for us the due diligence is important even if it's a very lean process because we talk about small companies mainly service companies. So we have two costs, which is labor cost and spare parts. So we prefer to focus on other parameters, like, for example, the loyalty of the technician, the presence of too many family members inside the company, the exposure to external factors, which is important when it's about, for example, installation companies because we are not willing to buy companies relying too much on fiscal bonuses or, for example, when you need to revamp your machine. So we prefer stability. We prefer recurrent revenues, predictable revenues. And even if margins can be not too attractive, our target is to buy at least 10% EBITDA. Today, in 2025 numbers, in this sense, we are very good. We are close to 20 even in HVAC, which is... Which was our target. So we're quite happy about that. [00:18:29] S0: So I was doing a bit of research, and I found that Lindbergh is mixing heating, AC, maintenance and water treatment in the same region. Is there a clear strategy behind this? Why are doing this?