We Study Billionaires - The Investor’s Podcast Network - TIP819: Lifco AB (LIFCO-B.ST): The Serial Acquirer Building an Unstoppable Compounding Engine w/ Kyle Grieve & Shawn O'Malley

Episode Date: May 31, 2026

Kyle Grieve and Shawn O’Malley analyze LIFCO, one of the world's leading industrial serial acquirers operating through three distinct divisions spanning dental supplies, demolition equipment, and niche systems solutions across Europe. IN THIS EPISODE YOU’LL LEARN: (00:00:00) Intro (00:01:39) The fascinating history of LIFCO (00:07:31) How Carl Bennett built the DNA that still guides LIFCO's acquisition strategy today (00:09:24) Fredrik Karlsson's legendary track record and why he bought more stock after being removed (00:11:16) The three distinct business segments and how they drive growth independently (00:17:29) LIFCO's rigorous eight-step acquisition process (00:31:52) How LIFCO uses put/call options to align management incentives (00:40:46) Why niche industrial markets create natural competitive advantages that larger competitors simply ignore (00:45:23) The capital efficiency metrics that prove LIFCO's returns are sustainable and real (01:09:26) What risks could derail the business (01:14:36) Multiple valuation scenarios showing potential returns under bull, base, and bear cases (01:16:53) Intrinsic value of Lifco (01:23:16) Portfolio decision Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences. BOOKS AND RESOURCES Join the exclusive ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠TIP Mastermind Community⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Track ⁠⁠⁠⁠The Intrinsic Value Portfolio⁠⁠⁠⁠. Read more on Lifco and other serial acquirer outperformers in The Compounders. Listen to Kyle's episode on The Compounders. Learn more about process power in Kyle's interview with Hamilton Helmer. Follow Kyle on ⁠⁠⁠⁠⁠⁠⁠⁠X⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠Linkedin⁠⁠⁠⁠⁠⁠⁠⁠. Follow Shawn on ⁠⁠⁠⁠⁠X⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠Linkedin⁠⁠⁠⁠⁠. Related ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠books⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ mentioned in the podcast. Ad-free episodes on our ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Premium Feed⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. NEW TO THE SHOW? Get smarter about valuing businesses through ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠The Intrinsic Value Newsletter⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Check out ⁠⁠⁠⁠⁠⁠⁠⁠The Investor’s Podcast Starter Packs⁠⁠⁠⁠⁠⁠⁠⁠. Follow our official social media accounts: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠X⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ | ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠LinkedIn⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ | ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Facebook⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Try our tool for picking stock winners and managing our portfolios: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠TIP Finance⁠⁠⁠⁠⁠⁠. Enjoy exclusive perks from our ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠favorite Apps and Services⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Learn how to better start, manage, and grow your business with the ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠best business podcasts⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. SPONSORS Support our free podcast by supporting our ⁠⁠sponsors⁠⁠: ⁠HardBlock⁠ ⁠Human Rights Foundation⁠ ⁠Plus500⁠ ⁠Netsuite⁠ ⁠Shopify⁠ ⁠Vanta⁠ References to any third-party products, services, or advertisers do not constitute endorsements, and The Investor’s Podcast Network is not responsible for any claims made by them. Learn more about your ad choices. Visit megaphone.fm/adchoices Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm

You're listening to TIP. Today we discuss one of the titans of serial acquires, a company with over 275 acquisition under its belt. And no, it's not a vertical market software acquire. These companies are in niche industrial markets like demolition robotics. You can say it's actually an anti-constlation software in nature, but it's still compounding earnings at 14% per year since its IPO, providing investors with multiple decades of sustainable, high-quality growth.

And this signals market beating capital efficiency, which they've accomplished and are continuing to expand on. And what really surprised me was that they haven't diluted shareholders at all while scaling this business up and compounding free cash flow well above 20% since going public. We'll examine lift goes past, present and future today and whether their acquisition criteria will continue generating market beating returns in the future. You're listening to the Intrinsic Value Podcast by the Investors Podcast Network. Since 2014, with over 180 million downloads, we've learned directly from the world's best investors. Now, we're applying those lessons to analyze businesses and investment opportunities every week,

helping you uncover intrinsic value. This show is not investment advice. It's intended for informational and entertainment purposes only. All opinions expressed by hosts and guests are solely their own, and they may have investments in the securities discussed. And now, here are your hosts, Sean O'Malley and Kyle Greve. Hey, folks, we have done a number of episodes over the years on serial acquirers. And in our intrinsic value portfolio that we build every week on this show, we do currently

own Chapters Group, a serial acquirer in the vertical market software space. And Kyle, I know you're very familiar with that area. And where Chapters Group is very much a smaller. acquire with about 50 acquisitions, the company that we'll be discussing today as a potential addition to our intrinsic value portfolio is really a titant of serial acquisition with over 275 acquisitions completed. Unlike our portfolio holding chapters group or also Constellation Software, which I know is one of the most well-known serial acquirers in the world, this business is not in the vertical

market software space. That is correct, Sean. So I began researching Lyftco back in about 20, 2022, and I wrote about it on my substack before I ended up joining TIP. And funny story. So I actually remember checking my subscribers back then and seeing that their CEO, Hare Waldemarson, had actually subscribed to my substack, which I was quite proud of at the time. But as you alluded to, Lifco is definitely not what you would consider a traditional software business. So you and Daniel covered Constellation Software and its family of spinoffs. But Lyfco is probably about as far away

from those types of businesses as you can get. So while the businesses themselves are different than a Constellation or even a Chapters group, LIFCO actually does share quite a few similarities, including things like having these distinct groups within it, the fact that it's a decentralized business structure, very disciplined capital allocation, very high and sustainable capital efficiency metrics, the conservative use of debt, as well as a very strong corporate governance structure. So I think I can guess that LFCO is a pretty high quality company, but it does sound like it has some similarities and also differences with Constellation Software.

So why don't you just go ahead and speak to the nuances of Lyfco's business model a bit? Yeah, so Lyftco is actually a pretty simple business. If you look at it through the three distinct operating segments, which are dental, demolition and tools and systems and solutions. Now, what makes Lyftco unique, I think, is a few things. So first, it focuses on acquiring small and medium-sized niche industrial businesses that sell pretty much worldwide. Second, the businesses must be cashful positive so it can feed the mothership with

more and more acquisition capital. Third, they have this very, very long-term focus on all their businesses, whether you're thinking like high term from the mothership level all the way down to each subsidiary. And then unlike your typical P firm, you know, they're just not interested in acquiring a business, firing half the staff just to increase margins, then flipping it for a profit in a few years' time. They really are in it for the long haul. So one very good example, just so when you understand kind of what a Lyftco business is like, is a business called Brock.

So it's a company that actually manufactures demolition. robots. Now, as you can guess, this is a super, super niche business in an even more niche market. So Brock claims how about 70% market share in the global small demolition robot market. The market is valued at only $250 million, but the business, while under LIFCO, has grown its margins past 30%. Now, one interesting part about Sero Acquires to really understand is just how powerful organic growth is. Generally, what happens with serial acquires is as a scale, organic growth just has a lower and lower impact. And if you can really just eke out one to two percent organic growth, you're certainly on

the right track. Now, Lyftco, luckily, is still small enough that it actually has quite a good amount of organic growth left. So in 2025, they still have 4.2% organic growth, which I think shows that they're able to still buy businesses at the right price and that these businesses still have some really good growth potential left in them to continue growing organically over time as Lyfco owns them. We've got a lot to cover today. And I just kind of wanted to say briefly here, you know, serial acquires are so interesting to me, especially when I first started digging into this business

model, because my first reaction was, man, how does this model exist? It really didn't make sense to me. And especially in the context of this phenomenon, where you have so many serial acquires that have just been excellent stewards of capital. And what I mean by that is, you know, we know how difficult it is to actively invest in stocks in the public markets and continually beat the market benchmarks. And yet, that's really what serial acquirers are trying to do, too, except they're typically buying majority stakes in private companies. And the thing is, these private businesses have to agree to sell themselves to a serial acquirer, right? It's not like you can just accumulate shares in the public market and maybe leverage that to get a board seat if you're really an

activist investor, right? You're entering into direct negotiations with often the founder of the business. And for this model to work well, you've got to convince them to sell probably their life's work at a very reasonable price to you. Otherwise, as they acquire, you're going to put yourself in a tough position to earn satisfactory returns over time if you overpay up front. And so that's why I say this business model in an intuitive sense feels like it shouldn't exist or shouldn't exist with the degree of success that so many serial acquires have had because you have to consistently find these win-win deals for both sides. And yeah, you would think it would be rarer than it is, but it's really not. We've seen this across so many different

geographies and market types and so many different companies that are running this acquire playbook. And we've seen a ton of serial acquires just do this playbook very well for many years. And actually, for whatever reason, there's a very large concentration of them in Sweden, in particular, which is where Lyfco is from. And so the reason the model can be sustainable, I think, is that you often have founders who are looking to cash out as they age because they have no errors to hand the business off to. And maybe their kids are interested in doing something else.

And if you've owned some dental practice for three decades, if you want to retire, then you need to sell your stake in it. You have to cash out. And so that's where the serial acquires can come in. and typically buy businesses for cheaper multiples than you see in public markets while providing the liquidity that a business owner really needs. And I don't want to get too carried away because we have a ton to unpack with Lyftco. So I'll rein myself in, but I just want to reflect a little bit on the serial acquire model generally. But how about we get started by examining the

history of Lyftco and its success over the decades? Yeah. So it's been a very, very successful business, both. privately and publicly. So since 2014, which is when it IPOed, it's grown earnings by about 14% per annum with a total return, including dividends, of about 15%. So very, very good returns. Now, one key person in the history of Lifco is a man named Carl Bennett, who is still the chairman of Lifco's board. So I think his story really matters because Lifco has largely followed the DNA, which Bennett instilled into the business back in its early days. So what happened here was Bennett basically started with Serial Quires all the way back in the 1980s with this business called

the Gettinge. Now, this was a carve out of one of Electrolux's divisions. Now, Gatinge was run in a very unique way. So they practiced very, very disciplined capital allocation. And within the first year, they were able to actually turn Gatinge around, I think, from probably a kind of an unprofitable business into improving its margins quite drastically. Now, one of their primary strategies was quite simple, just raise prices. So the business had actually not raised prices in 10 years. So they viewed that as kind of just a low hanging fruit that was available. to them to just increase margins and increase profits. Now, Gatinge eventually went public and in 1995 they purchased a business called LickCare AB,

and that was a business that specialized in purchasing metal equipment and services. Now, initially, the thought process was that Lick Care would complement Gatinge's product offerings, but that never ended up actually materializing. Instead, Bennett decided to keep both businesses but run them separately. So in 1998, LickCare was actually spun out and became LIFCO. Now, in Lifco's infancy, it basically focused primarily on selling dental products. Now, at this time, Lifco had single-digit margins, and Bennett realized that he needed help getting those margins up. So he found this gentleman named Frederick Carlson, who had taken

another business from 0% to 10% margins in less than five years. Now, Carlson ended up working very similar magic with Lifco as well, taking margins from 2% to 8% in just four years. Now, I think Carlson was just as important as Bennett because he really helped instill a lot of the decentralization that I think Lyfco still exudes today. Now, I'll end this history lesson by mentioning a very few fascinating things about Frederick Carlson. So he ended up leaving Lyfco in 2019 after a dispute regarding his bonus. Now, on the day that he was actually fired, Lifco's shares went down 10% once they found out about the firing. And at this time, Carlson picked up his phone. He called his

broker and he actually bought more Lifco shares. So this is nearly unheard of for a CEO who's just removed by the board to do, but he had just so much conviction in the business. and in Lifco's new CEO, Pair, Waldemarsen, that he just couldn't help himself. But, you know, his track record was incredible, I would say. I mean, I don't know what other word you can really use when you look at the types of earnings growth that he had while in command. So he compounded earnings at 25% annually between 1998 and 2019, which is a very, very unusual growth number to achieve over three decades.

That's got to be one of the longest track records of earnings growth of 25% a year I've probably ever come across. I just love these stories about the serial acquirers because they're often, just some of the best case studies on how to run business as well and how to allocate capital well. And, you know, Buffett famously bought Berkshire as a dying textile business and turned it into one of the world's best acquisition machines. And that's often the type of story you see with these serial acquires where, you know, the story starts in a totally different place.

And then the business converges on this proven model that, you know, really drives the success over time and the transformation. but how about we get to how Lyfco is currently structured? So you mentioned the dental segments. So why don't we start there and then discuss the other segments after that? Yeah, absolutely. So the dental segment basically does things such as delivering consumables, equipment and technical services to dentists primarily in Europe,

but they have some operations outside mainly in the U.S. as well. Now, even though I said Lyftco was not like consolation, they actually do have a very small IT software segment inside of the dental segment, but, you know, it's only 5% of the revenue. The other segments are distribution at about 54% manufacturing at 25% and dental technology at 16%. Now, companies in the dental segment manufacture and or sell specialized dental products. So these are things like dentures, disinfectants, saliva injectors, bite registration materials, and dental impression materials.

I know that's a lot of stuff, but, you know, when you go to a dentist and they use all these small instruments on you, they have to come from somewhere, and Lyftco would be one of the suppliers of those materials. Now, they also provide dental technology solutions and medical systems records in Europe. So this segment is attractive because it tends to be, you know, non-cyclical and allows for a very steady demand regardless of what's happening in the world or what kind of macroeconomic conditions we're in. Now, this segment supports about 21.6% margins. Next is a demolition and tool segment. So this is the segment that I referred to earlier that Brock is a part of. So it develops and manufacturers and sells specialized equipment for the

reconstruction, demolition, and infrastructure industries. It's comprised of about three divisions. You got the remote controlled demolition robots, which are sold under the Brock Group, which makes of about 24% of sales. You got crane and excavator attachments, which make about 59% of sales. And then finally, you just got other niche machineries, which is about 16% of sales. Now, the remote controlled robots basically allow machines to go places that humans can't. You know, they can handle really incredibly hot and stressful conditions. So the robots' use case are for things like demolition, renovating, and lining removal. The crane and excavator attachments allow a single piece of machinery to be used for multiple purposes.

Now, the applications for this division are in things like construction, earthwork, you know, snow clearing, demolition, pipe and cable laying, and even forestry work. This segment has very nice and high margins at about 24%. Now, the final segment is the system solutions, which is the large, segment by revenue at about 54% of total sales. So it has five divisions. First is contract manufacturing. Then you have environmental technology, infrastructure products, special products, and transportation products. So the system solution segment pretty much focuses on business to business companies in other very niche areas. Products and services include things like

specialized manufacturing and pharmaceutical equipment, recycling machinery, electrical installation equipment, niche manufacturing specialization, and then products for vehicle interiors. The segment has 23% margins, so again, very high. Now, I want to just pause here to note that actually since the system solution segment continues to grow, management just announced during their Q1, 2026 earnings call that they're actually going to be separating the environmental technology and the transportation products division into their own segment going into future earnings releases. So they're clearly dealing in some super niche industries that, that,

don't really seem interrelated at all, just to put it bluntly. But these niche markets tend to be a pretty good place to play in as an investor because the markets are less efficient and generally a lot less attractive to new entrants on the competitive side. And sometimes can probably only support one dental practice, for example. And so that business can have a sort of micro-monopoly. And that logic applies to the other areas they make acquisitions in like manufacturing or or recycling machinery, but I think the dentist example is a little bit more relatable for most people. And I alluded to this earlier, but a lack of discipline from serial acquires can absolutely be a death sentence. And so the problem with businesses that have cash to spend is that they are

often eager to spend it, but that doesn't always equate to delivering shareholder value over time. And so it's quite rare to find a team of capital allocators that has the patience to sit and wait for the right opportunities. So why don't you take us through Lyftco's acquisition process, since that's going to be essential, really for any potential investors to understand and for us to build a side if this is a company we want to put in the portfolio? Yeah, so Lyftco's acquisition model is based on achieving cash flows for many, many years after they purchased it.

So, you know, they're not just looking for a melting ice cube. but a business that will be around, hopefully, for multiple decades. So over the years, they've placed an increasing emphasis on sustainability. Now, this started back in 2016, and they've really kept at it. So, you know, I don't really think this appears to be some sort of ESG virtue signaling. Now, further acquisitions, they look for the following. Businesses that are a market leader in their niche, businesses that are not overly dependent on individual suppliers or customers,

and businesses that are able to meet certain sustainability measures and can keep current management in place if possible. Now, a good culture 100% matters a lot because, you know, Lyftco is decentralized, as I mentioned. And that means that a lot of responsibility is going to be passed off to local management teams. Now, a few advantages of being part of Lyftco are its financing capabilities. Let's say a business requires some capital. So in that case, instead of borrowing from a bank, they can borrow from the mothership, which is Lyftco, and that can often make a much better choice because you simply get better

terms on your financing. Now, additionally, since Lyfco has this multi-decade period of success, managements of subsidiaries can tap into Lyftco management, understand where they're coming from, get expertise on certain issues that they've maybe had problems with in the past. And since Lyftco obviously is bigger and bigger, you know, they have this large pool of different people with different expertise

to draw from, meaning that they can hopefully solve more problems than maybe just an individual could on their own. Yeah, Lyftco can also, you know, borrow at better terms, kind of like what you said. and then roll that into lending cash within the company to subsidiaries. And that can be an advantage. And we're often taught in business school about how terrible conglomerates are.

And that can absolutely be true, to be clear, if anybody's ever looked at the Japanese markets, you'll know that well. But there can be real advantages to the model two. And this will be a theme today. If you have the right people running things who set up the proper incentive structure across the organization and can make disciplined investments with the model, the capital that's sent upstream to the mothership, well, that can be a model that works really well. So, you know, let's get to the nitty gritty here, though. What are they paying for their acquisitions?

And how are they structuring these deals? Are they using earnouts or equity to help incentivize management to continue creating value? Yeah, so Lifco is really, really focused on growing their EBITDA, which has been growing at a very, very nice pace over the year. So the improvements in margins that Carlson helped build into Lifko's DNA have clearly stuck, which is why EBTA margins have steadily climbed over the years. Now, since they are focused on EBTA, they have to focus on the right kind of acquisition process. So they do a really, really good job in their disclosures of spelling out exactly what that process is. It's an eight-step process. So the first step is just to identify the correct potential targets. I think this is probably universal

across all serial choirs. But Lyfco basically has its own M&A team, which is made up of a group of managers and other employees who actively search for these new opportunities. Now, since Lyftco is very well known, they're often contacted by brokers and business owners themselves, which obviously makes that process a lot easier. They're basically focused on businesses doing about a million to 20 million euro in sales. Now, the second thing to make sure of here is that they are excluding the wrong fits from the acquisition pipeline. So, you know, they basically blacklist certain industries.

This is things like businesses that manufacture or sell things like weapons, alcohol, tobacco, fossil fuels, uranium, adult content, games, or fast-moving consumer goods, or lastly, extract minerals from the earth. Now, third, is to put a focus on businesses that contribute to their customer's sustainability efforts. So businesses that do things like, you know, reduce energy consumption or improve the environment are definitely going to be an attractive business to them. Fourth, they have this ethics community, which reviews and then either approves or denies

a specific acquisition. The ethics committee consists of the CEO and the chairman. Fifth, the potential acquisition target goes through their due diligence. Lifco made a point here that this has to do once again with sustainability. They want to make sure that the businesses treat everyone around them, including things like the working conditions and the environment in a good way. They'll also look at their history to make sure there's no violations that would make them a company that they want to avoid.

Sixth year is the potential candidate is assessed for the durability of its basically existence. So this means a business must be stable, a leader in its niche, and be positioned very well in the value chain while avoiding large dependencies on customers or suppliers, and then also, of course, have limited technological disruption risk and be documented over time as being a profitable business. Now, seventh, we're getting to the end here. Once the business has completed all of these steps, it's reviewed by the group's board of directors for approval. Now, the eighth and final step of the process is in the reporting and

monitoring. So this is a step that I would consider to be part of the integration process. So it includes understanding things like Lifco's culture, the remuneration and reporting systems, as well as the sustainability metrics that they use. So a new board is appointed with the chairman from Lyfco who already has success in managing a company in the Lyftgo group. So as part of that integration process, it's made very clear that things like working capital management will be a very high importance. And together, they figure out plans that are going to help with short-term and long-term planning. Yeah. So, you know, when you first hear all that, my gut reaction is that that's a lot of bureaucracy. There's a lot of layers of review. But, you know, clearly it has worked

well for them. And it's probably a feature, not a bug, that they approach it that way, because they're pouring over every detail and making very careful and intentional decisions about what they invest in. And maybe my only other quibble is that while Buffett has shown how owning companies with superior ethics and business principles is a winning strategy long term, that doesn't necessarily mean avoiding companies that have any kind of negative externalities for the world in the way that it seems like Lyftco filters things out. So, for example, Coca-Cola has been a wonderful investment for Berkshire. But its effect on public health is pretty obviously negative.

And yet Buffett hasn't been shy about investing in oil. oil and gas either. And so the point being there, these industries that don't meet ESG standards are commonly screened out by investors. And that can leave really compelling deals if you dig through these unloved areas. You know, that's like sort of my value investor roots coming out a bit. But clearly, Lyfco's approach has worked just fine. But I do wonder if being too strict about what areas you won't invest in is unnecessarily restrictive, or at least will prove to be unnecessarily restrictive going forward as they run into this law of large numbers problem that I think we'll probably talk about more with Lyfco as a serial acquire. But anyways, let's say I'm,

you know, an investor who wants exposure to or a lack of exposure to certain geographies. With everything happening in Russia and Ukraine, for example, some investors think that there's a real risk to investing in Europe at the moment. So as we think about what risks that we want to filter out and have exposure to in our own portfolio, I would be very curious to hear more about how, as a Swedish company, where Lyftco operates. Yeah, so before I get to that question, Sean, I just want to comment on something you said there about, you know, that process and how it feels like there's a lot of layers. So I think the fact that they have this process and maybe the way that I listed it makes it appear that way. But in reality, I think the actual, if you think

of it as having the board of directors at the company level and then having individual smaller board of directors. So, you know, I don't think everything's actually being pushed up top. They have these smaller, basically, decentralized groups that are doing it. And that way you skip a lot of that centralization and bureaucracy that basically just hamstrings businesses. And unfortunately, hamstrings them even more as they scale. So just wanted to put that out there. Now, back to your question here. So in terms of the risk happening in Europe, you know, personally, I have a couple businesses. We have a couple businesses in the intrinsic value portfolio in Europe. And, you know, I think we have to basically stay aware of what's going on with the war going

on in Ukraine. You know, I think I'm hopeful that, you know, given what's happened so far, it's going to deter Russia from doing anything like this anytime soon. But, you know, we never know. Now, as for the geographic order of Sweden, it's definitely going to be number one in terms of where they're exposed to with Germany right on its tail. And then following that, you got UK, Italy and Norway, which have all been very, very good growers over the last few years. Let's take a quick break and hear from today's sponsors. Every business is asking the same question. How do we make AI work for us? Sitting on the sidelines is of course not an option.

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but it's especially important here in serial acquisition. So what is Lifko's philosophy on this? How do they think about the price that they're paying for the acquisitions that they make? Yeah, it's kind of odd, but Lifco actually doesn't explicitly tell you what kind of multiples that they're looking for on their acquisition prices. So my assumption is probably they're doing this for strategic reasons. You know, they're just trying to avoid inviting others. to copy what they're doing because obviously it's worked very, very well in their history. Now, I'm not sure that's possible given that there's just no shortage of serial acquires out there, but I think you get my point.

So most serial acquires in this area are looking for something called serial acquire arbitrage. So this basically means that you're getting bought out at a private market multiple, then you immediately re-rate once you become part of a publicly traded mothership. So generally four to seven times EBITA sounds about right to me for niche private businesses. So I loaded up the sales that they bought in 2025, then assumed an EBITA margin right around Lyftco's consolidated a number of about 22%. And from there, I divided the EBTA by the cash that they use in the acquisition of these subsidiaries.

And using that data, I'm left with an EBTA multiple about seven times on average for their acquisitions last year. So I think that's probably a pretty reasonable midpoint of what they're looking for. Now, I'd like to get back to that serial acquire arbitrage thing I just discussed. So let's take a look at an example here. So let's look at a business called Toppy, which was one of Lyfco's acquisitions in 2025. So this is a business that specializes in pallet exchange solutions. Now, the business did about 17 million in euros in sales at acquisition point.

So if we assume about 23% margins for the system solution segment, then this business would be doing about 4 million or so euros in EBITA. So if they paid seven times EBITA, then the assumed price is somewhere around 27 million euros. But, okay, now we have to take into account that Lyfco trades obviously at a much higher premium than seven times EBITDA. So Lyfto's current EV to EBITDA, which is pretty similar to the EBITDA number, is around 18 times. So under Lyftco, the business is actually valued at about 70 million euro. Wow. That's really interesting. I mean, yeah, it does make sense why they don't want to be too specific about disclosing acquisition prices from a competitive perspective.

but also not giving any real insights into this over time is sort of frustrating as an investor, right? Because you're speculating on the acquired businesses margins and the multiples paid. And yeah, as an outside investor, it just makes it tricky to grade the quality of specific transactions and figure out, you know, how much of this is due to investing skill and then how much of this is due to, you know, this public market premium arbitrage that you sort of alluded to where just immediately you're pulling a private company into the public markets and, you know, the valuation of the business correspondingly jumps in some way. And it just becomes sort of an exercise in faith where you're trusting management and

their track record, but you can't audit the decisions they're making too closely. And, you know, it's the same problem I've always had with Constellation. It's actually worse there because they have many more subsidiaries. And a big part of a serial acquires success isn't just what they pay for a business, of course, but also how those businesses perform after their bot. And you don't want to buy a business at its peak only for it to fall off after you buy it. And so that's a great way to destroy shareholder value. So talk to me a little bit about how Lyftco incentivizes the acquired management team

to continue to produce at a high level after they get bought out. Yeah, Sean, before I get into that, I will say on your point there about trust. I think that is a huge, huge factor in Sierra Acquires. You basically have to trust the fact that they're going to continue doing a job without necessarily having the disclosure to actually, you know, look at the data to confirm that what they're doing is the right thing. I know I've had a couple of businesses in the past where unfortunately, I think management didn't do as good enough job. And then in that case, it's like, okay, well, can I trust you anymore? And obviously, luckily, I think in Lyftco's case

going in, I, you know, I think they've just, they have such a, such a good track history that you kind of have to default to trusting them if you want to invest in them, of course. And then you kind of just have to look at the mothership numbers from there and just make sure that they're going on the right path. Now, back to your question there on earnouts. So the earn out structure is definitely a lot different from what I usually see. So they use something called put call options in their acquisitions to purchase a remaining minority stake in their subsidiary. So here's how it works. So the seller of the business gets a put option. So this means that they can sell or put their shares to Lifco at a predetermined price.

Now, at the exact same time, Lyftco has a call option or the right to buy or call away the remaining shares from the seller. If either party exercises their option, the other side is basically obligated to buy or sell from the other party. Now, in this case, LIFCO will always acquire the shares from the minority shareholder, which helps LIFCO get to that 100% ownership over time. Now, the question here is, you know, why do they use the system? So there's a couple really good reasons. First, it gives the minority shareholders some flexibility. This allows the sellers to have additional upside participation after they sell. And it also aligns the interest of the minority shareholder, as well as Lyfco and Lyfco's shareholders. So the option price is tied to future

earnings with an attached multiple to it. So if the minority shareholder is able to achieve growth in those earnings, then they can increase the value of their put option. Lifco deals can vary considerably in terms of their cash outlay and put call options. So in the last two years, put call options have ranged between about 14 to 17 percent of deal value and the remainder is funded through internally generated cash as well as debt. Now, the put call options can last for multiple years. From what I could gather from their financials, most put call options mature in the kind of a two to five year time period after acquisition. Now, it's really interesting to me to see that they have some of these put call options that actually mature over five years from now,

which I think is a really good signal that, you know, they're looking for businesses that hopefully are aligning themselves with Lifco over the long term. Now, another thing worth mentioning is that inside of these put call options, they do have, you know, that dirty word, which is options in their wording. But these are actually not dilutive to shareholders upon exercise. So instead, Lyfco is using cash or debt on the put call option, which is really great to see as it just doesn't dilute shareholders at all. Now, I think that clearly states that Lyftco cares very, very deeply about shareholder value. And very interestingly, they've actually never issued options or used dilutive financing in its history. I've got to say, I don't think I've seen this specific approach before with

the put call strategy. And yes, I mean, it's really interesting, honestly. And I think I need to wrap my head around it more. My gut reaction is that I think it's sort of brilliant, but like I said, I feel like I need to reflect on it more. And so on the topic of these put call options, I do think we should dive into Lyfto's debt picture a little bit more, because if they're not issuing stock to close deals, as you said, they're using cash. And, you know, whether that's from internally generated cash sources or if that's from raising debts. Do you see the put call options here as being like a type of debt or liability on their balance sheet? Is that the right way to think about this? Yeah, let me get to your debt point first. Then I'll layer on the put call options.

So, Lifco is definitely not a business that avoids debt since they have many, many potential acquisition targets and only so much cash generated by the business, they are using debt to maximize their ability to create shareholder value. So their net debt to EBIT debt target is between two and three times. And they've generally stuck below that low end of that range. So, you know, the intelligent use of debt comes down to a couple things such as basically your capital allocation decisions. I think if you have a high return on capital, I personally am fine with a little bit of debt. It has to be manageable. But, you know, if you have a little bit of debt and you have a long track record of success and that rare ability to just maintain a reasonably high amount

of capital efficiency going forward, well, then you can create a lot of shareholder value. Now, where debt can definitely be dangerous to a Ciro acquire is if their acquisition quality falls off and they begin to have issues servicing that debt. But as I saw from Lifco's numbers, they just basically rarely go above that two times net debt to EBITDA number. And given the steadiness of their niche businesses, I think they're very, very well positioned to continue adding more acquisitions in the near future. Now, if we break down their debt, both at the current and long-term level. It consists of loans with variable interests of about 9.7 billion SEK, lease liabilities of 1.3 billion SEC, and then the put-call options like you just discussed of about

2.9 billion SEC. So to answer your question on whether the put-call options are debt, the answer is definitely yes, but one cool feature of the put-call options is that they actually aren't interest-bearing. Yeah, I mean, that is, you know, I think this could lead us, this whole conversation could lead us to a rabbit hole of discussing when and how a serial acquirer thinks about carrying debt at the subsidiary level or at the parent company level. But overall, I mean, it does seem like a pretty pragmatic approach, especially with this option strategy, where, as you said, they're getting leverage without sending cash out the door via interest payments. And so there's a decent argument for this business having maybe some sort of competitive advantages.

otherwise, it wouldn't have compounded their top line and EBITA at over 14% since 2006. And so I do generally think a business needs some sort of moat to accomplish this kind of growth over that long of a period. But I'm really curious to hear more about how you think about that. Does LIFCO have a moat? So I think when it comes to CERR acquires, the question of a competitive advantage is nearly always kind of mysterious, you know? So when you think of it, if a business is made of a bunch of businesses doing 10 million

euro and revenue, how could it possibly have a moat that protects it from competitors? Now, to me, the answer kind of lies in the business model. And more specifically, it lies in whether or not a business can pick and choose a correct subsidiaries that truly have these long-lasting characteristics. So some listeners might consider this to be process power, which is a competitive advantage that Hamilton-Helbrun uses in his book, Seven Powers. So I had the opportunity and chance to interview him. And I asked him if he ever found another business that had process power. And he told me no. And he

actually even asked some of his other members of his fund. So I'm very hesitant to say that certain serial acquirers do have process power. But Helmer defines the benefit of a process power as a company with process power is able to improve product attributes and or lower costs as a result of process involvement embedded within the organization. So the question of whether Lifco has process power requires us to just answer one question. Is Lyftco improving companies through their operational process or are they just managing them more carefully? So since Lyftco is decentralized, I don't think they're focused too much on, you know, firing people inside of an acquired business just to optimize their margins. Where Lyftco is really, I think, showing some signs

of processing power is in the fact that they have consistently tried to steer the business towards higher and higher margin areas. For instance, the dental division over time has explicitly shifted its product mix from distribution to more higher margin manufacturing and technology businesses. So an even better, more recent example was one that I mentioned earlier with the System Solutions Division splitting off environmental technology and the Transportation Products Division, which both have among the highest margins in all of Lifco's divisions. So environmental technology has EBITA margins of around 28%, while transportation products have an EBITA margin of around 25%.

Now, as Lyftco continues to scale, and they make these other divisions a larger and large folks of the business, if they can continue growing while maintaining or increasing profit margins, then that should theoretically allow LIFCO to have operating leverage at both the consolidated and divisional level. When CEO Pair Waldemarsson was asked if he actively searches for higher margin businesses, he sort of sidestepped it and noted that they just look for high quality businesses and that the margins tend to vary somewhere between that 22 to 30 percent mark. But circling back to processing power, you know, I think I'll leave it to listeners to determine if they think LIFCO has a processing power mode or not.

I'm not sure one specific moat to assign to this company is the right framework to use here because it is probably a bit simplifying. And why are some sports teams, for example, consistently better than others? And it's sort of a complex question, but there does seem to be a degree of institutional knowledge that can provide an advantage to certain sports franchises that consistently draft better and make better trades and signings and other organizations. And I know you're a big NBA fan, Kyle. And so the NBA's Oklahoma City Thunder, I mean, they've been a great illustration of this in the Sam Presti era for, you know, some like two decades now.

And just be my own devil's advocate, though. The counter argument is that franchise performance across professional sports is pretty mean reverting. So there is a degree of randomness here. And, you know, I'm a little iffy on that. But I do think there can be also a brand advantage in a sense for serial acquires. And, you know, if you gain a reputation for treating people well, well by embedding options into acquisitions and not running companies into the ground after buying them, sellers are going to be more keen to work with you.

And that reputation can compound, right? Buffett is, again, probably the best example of this. You know, in a crisis, people call Buffett in Berkshire because they know he's good for the money and just to continue the sports analogies, right? Some of the best franchises, you know, it helps that they have, you know, sometimes, you know, bigger markets and stuff. But also their reputation enables them, you know, people, know that it's a good organization to go and play for. And that can be, you know, consistent advantage,

right? If you're signing with the Yankees, you know, there's a prestige and brand value that definitely affects your thinking. And I don't know what else you would call that other than, you know, an advantage for the Yankees. And again, that's, I, you know, not to say that, that Lyftco is, you know, they're the New York Yankees, but, you know, I think the logic applies of how your reputation can be such an important thing into the opportunities that arise. And so, I want to ask you, though, is there anything else that you think has helped them outperform over the years that maybe we should linger on? Yeah, I think there's a lot.

But to just touch on your MBA analogy there, I really like it. And I think the Thunder are a great example. Another great example would be the San Antonio Spurs, who are also an incredible team. And interestingly, you brought up that point about mean reverting. And even though the Spurs are this organization that have been like incredible for multiple decades, you know, basically a couple years ago, they weren't that good. And so it just kind of goes to show you that even if you have this incredible culture, you mean revert. And I think if you do have an incredible culture, the thing that's really good about that is that you mean revert for a shorter period of time.

So in a company like Lifco, you know, right now they're going through some period of a little bit, I guess you could call it mean reversion. Maybe it's underperformance compared to where they've performed previously. But I think with these really, really high quality teams, just like having a really, really high quality sports franchise, you fix things pretty quickly, especially compared to other teams. So getting back to your question here about what else I think has helped them outperform. I think they have a lot of kind of more non-traditional advantages. So for example, investing in businesses that serve these small niche industries is actually a pretty good competitive advantage in itself. You know, I've seen this numerous times in a lot of the microcap businesses that I like

to look at. So the question that I get when I'm talking about these kind of microcaps with other investors is if this business is only doing, you know, maybe 20 million in sales and they have competitors out there doing billions in sales, why wouldn't they just steal their market share? And I think that's a really, really good question. But the answer is actually quite simple. So these small businesses, some of them at least have kind of these smaller patents that have been built out over many, many years. And while a bigger company could theoretically compete, it might actually take a lot of time and resources just to get to that point. And, you know,

let's say there's a business out there doing $2 billion in sales. Are they really going to go out of their way to try and beat a competitor where the market is like, you know, let's say $40 million, and unlikely to really grow much past that. And I think the answer to that is just no, because even if they did capture all of that market share, it would just end up being a rounding error for them. So I think they just often leave it for a lot of these small fish companies. And that's a business that Lifco picks up and it's been pretty successful. So, you know, I think with many of Lyfco's niche businesses, they're in that kind of pretty

similar situation. You know, there's competitors out there who are much more likely to pursue industries where the TAM is in the billions, you know, not the millions. And if you have a business that is a leader in its niche, then you are well positioned to continue reaping the profits from that business for many years to come. But again, it definitely depends on how good Lyftco's acquisition criteria is. And so far, it's proven to be very, very good. I think they're great points. And this is what I was sort of thinking about earlier with that micro-monopoly comment I made. And theoretically, these opportunities should be competed away.

But in reality, that doesn't necessarily mean that they are. You get these sort of gaps in the markets where It doesn't make sense for a certain competitor to allocate the resources necessary to take over, you know, a very small TAM. And so moving along here, let's spend some time looking at Lufco's KPIs. You've spoken a lot today about EBITA, but what other KPIs are important to consider here? Yeah, there's a couple. So I think two that are very important are free cash flow and capital efficiency, which they use called return on capital employed or just ROS,

which I'll be referring to from here on out. So I'll leave ROS alone because I'm going to go over it in a little bit later when we talk about capital efficiency. But let's get back to free cash flow. So free cash flow per share has grown exponentially well since LIFCO has IPOed in 2014 with about a 23% kegher. Now obviously, this has been a great proxy for value creation. When looking at serial acquires, I like to look at the cash that's generated from operations

just because it doesn't remove cash that is invested in new acquisitions. So if you're looking for kind of like a constant cash number, like that number even more than free cash flow, which excludes cash for acquisitions as well as growth cap-ex. Now, I briefly touched on EBITA margins, but they are also a very, very important metric. So it's a metric where I think it has to reach a ceiling definitely at some point. But given the increased margins in some of the other divisions, perhaps they can get EBITA margins from their current level of around 22 and a half percent, maybe towards 25-ish over the next five to 10 years. Now, given their strong track record of margin improvement, I definitely would not discount

their ability to do this. Now, if they chose to continue getting the right mix into higher margin businesses, I think it could definitely raise the bar for the rest of the entire business. Now, I always find it really, really interesting for a business like Lifco, which I think is already large to really just go out and continue finding businesses that are better and better in terms of their margins. It's just not easy to do, but I think they've shown an incredible ability to do it very, very well. Yeah, it sounds like that. And one other metric I wanted to ask about before we circle back to talking about returns on capital is CAPEX. So given that this business does have some exposure to manufacturing, I would assume that their capital expenditures are fairly meaningful.

Right. So when I first started learning what Lyft call, I actually assume the exact same thing. But they share their CAPX to sales directly on their earnings presentation. And it actually stays basically permanently stabilized in just the one to two percent range, which I think is very very. very, very low with a business that has some sort of manufacturing as part of its business model. So I wanted to dig in and find out more on how this was possible. So the best answer that I could find is that even though Lyfco has, quote, manufacturing, unquote, businesses, they're more like assembly businesses.

So for this reason, they don't have to worry about, you know, maintaining expensive machinery or product lines and they can more or less just piece equipment together. Basically, they're buying, you know, finished components from a manufacturer than assembling them themselves. So because Lyftgo doesn't need to reinvest in that type of equipment, their businesses all tend to not need much capital to just function as is. Now, we've spoken about this a lot, Sean, but I think we both prefer businesses that can reinvest pretty much 100% of profits back into their business.

But, you know, Sierra Acquires are kind of an exception because instead of buying businesses that can reinvest at high rates, the mothership can then just reinvest at high rates without reinvesting back into their own businesses. But to make things even better, Lyftgo obviously has some work. organic growth. So I would assume that there's certain businesses that are reinvesting into some growth opportunities. But my assumption is that this number is probably a lot lower compared to the wide variety of other businesses that they have as well as the opportunities that they have to invest into other businesses. Let's bring it all full circle by diving back into Lifco's capital

efficiency. And judging by the reported numbers, they look good to say the least, right? Yeah. So I think the capital efficiency metrics on this business are very nice and more importantly, sustainable. So as I mentioned, LIFCO uses this metric called return on capital employed, ROS, and they define this as EBITA before acquisition costs divided by capital employed. Now, EBITA is pretty straightforward. You can just look at operating income, then add back amortization of intangible assets. Now, for the denominator, capital employed equals total assets minus cash and cash equivalents, minus interest-bearing pension provisions, minus non-interest-bearing liabilities. Then they simply just average this out over the last four quarters. They also show

this number excluding Goodwill. Now, I personally like capital efficiency metrics, which maybe have some correlation with my expected returns in the future. So when you remove Goodwill and other intangibles, the capital employee numbers are so low that your Roast number actually goes all the way up into the triple digits, which, you know, I don't know about you. It's just not really correlated with future returns of the business. And besides, you know, if you're making an acquisition and you're buying a business not only for intangible assets, but also for its intangible assets for things like brand, customer relationships, and even expertise, I feel like that's obviously something that does provide value and therefore you paid up for it. So it's still relevant

to the purchase price and the capital that you've employed. Either way you look at it, a rose over 20%, which Lifco has is a very good number. Now, another important consideration is just how far the rose has moved upwards. So it's actually moved down a little peak in 2023 of 22.6%, but it's still up from back in 2016 when it was about 18.6%. So with the current drop in rose, I think it's more of a product of two things. So first, it's a part of their current investment phase. You know, some of the newer investments that they made are going to take some time to become fully optimized and integrated. And once they are, we should see those capital efficiency metrics start to normalize or maybe even increase. And then the second part here that's important to take into

account is there's been a bit of market weakness in the demolition and tool division. So revenue has decreased and margins have compressed a little bit. There are quite a few questions over this in the last quarters and their earnings call about this exact segment. Now, it looks like with the construction industry being part of their target market and it not exactly lighting the world on fire, they've kind of faced some headwinds. Now, I assume that this will normalize at some point, but it's impossible to know exactly when that will happen. Let's take a quick break and hear from today sponsors. Every business is asking the same question. How do we make AI work for us? Sitting on the sidelines is of course not an option. Your competitors are already making their move,

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slash T-I-P. All right, back to the show. One of the things I've always sort of resented is, you know, I see on social media all the time, these like supposed investing gurus that tell beginning investors to almost blindly focus on returns on capital metrics. And, you know, it's just anybody can run a screen for returns on capital. And also, you know, you've often got to make adjustments for the numbers to be meaningful. And there's a lot of adjustments being made here. And so if you don't have that context, you can just really mislead yourself, I think. And so Daniel and I have talked a lot about how buybacks can also have this effect and shrinking the equity base and inflating returns on capital. And so

You're speaking of buybacks and capital distributions, you mentioned that Lyfco has avoided diluting shareholders ever since their IPO. So maybe you can paint some more color around how they think about buybacks and dividends. Yeah, so Lyftco does not engage in buybacks. Instead, they basically focus exclusively on distributions via dividends. So I'm not sure how many Swedish businesses that you've looked at, Sean, but it's actually quite normal for businesses in Sweden to issue dividends, even though personally, I'd rather they skipped them. So just to get into their dividend strategy, basically they distribute about 30 to 50%

of after-tax profit as dividends. For full year 2025, the dividend pay-l ratio was about 33%. Their dividend growth has essentially tracked their profit growth. So, you know, I think it's very, very likely that they're going to continue this policy into the future. Now, there's a few ways of looking at this. I think culturally, Swedish corporations are very attracted to the model of paying dividends to their shareholders. So according to the organization for economic cooperation and development or OECD, in 2022, 61% of publicly held Swedish companies paid a dividend, which they said led all peers. Now, obviously, the data here is supporting my assumptions. So I've come across a few cero choirs that do pay dividends. And generally, you know, I would prefer that the businesses

not have a dividend policy at all, as I think they're kind of leaving potential money on the table. If you have the right capital efficiency, which LIFCO has, and a large pipeline of a potential acquisitions, which I think Lyfco also has. Now, to put it another way, if Lyfco kept more of its profits in the business, they could then de-lever even more and reduce their need for leverage, which would also reduce financing expenses. Now, I understand paying a dividend when you have nowhere else to put your money, but in Lyfco's case, they have many more ideas than internal cash flow, which is why they are using debt. So in my view, the dividend is probably one of the only blemishes on Lyftco, which is otherwise a very, very high-quality business. Now, paying a

dividend would not be a reason that this business is not worth owning. So please don't get me wrong. But, you know, I just have to mention that for Cyril acquires in the position that I think Lyfco is in, I think the best use of capital would be to just reinvest all that back into the business to continue feeding the compounding machine. Absolutely agree with your thoughts there on the dividend and reinvestment. And, you know, just to clarify why for listeners, why the dividend policy can be problematic is because you're shifting a tax burden onto investors without their consent. If you reinvest into a project, there's no taxes on that if you want to call a transaction. Whereas if you take the same amount of money and you send it out to shareholders,

and so then you would have to pay income tax on those dividends and basically interrupting your compounding by taking your capital and then paying a cutout to the government every time there's a dividend, that can be really, really consequential over long period. of time. And so, yeah, like I said, I really agree with how you paint things there around the dividend. And one other thing you mentioned is that Lyftco has many more ideas than they do have cash flow. So maybe you can expand on that a little more. Yeah. So this is an incredibly important nuance to understand about Lyftco. So the business currently has, you know, this market cap of 118 billion SEC, which comes out to about 12.6 billion USD. And they also have 275 companies.

So, you know, this isn't a small operation by any means. And yet, when you actually look at the size of their potential market, they're just barely making a dent. So according to the European Commission, small and medium-sized businesses or SMBs, make up the vast majority of European businesses. And this is the exact type of business that LIFCO is looking for. So that puts the SMB market at about 32 million businesses. So, you know, I don't really see them running out of ideas to look for anytime soon.

Now, an important caveat to that number I just gave you, Lyftco obviously only buys these very, very specific niche business. And my guess that would be that this is probably a very, very small number of those actual businesses that would make up the specific niches that Lyftco wants to get into. So, you know, let's assume a small number, I don't know, 5%, you know, that make a decent fit. That's still 1.6 million potential small and medium sized businesses. And I'm not saying Lyftco is ever going to be some sort of consolidator of every single

small and niche business in the world or in Europe. but just to say that I think that they have a large amount of potential targets out there. And then you take into account there's always new businesses coming online. So that number is probably going to grow at a very, very low rate, maybe the low single digits. But still, that's a meaningful rate and it will continue to rise up as more time passes. So, you know, in terms of growth, I think really the biggest concern for the business isn't where it can find more potential opportunities, but it will be in ensuring that they have the proper support to manage, you know, 500, 750, 1,000 companies.

over the next few decades. But I'm going to go over that in some more detail here shortly. Yeah, serial acquires inevitably run up against this law of large numbers probably, right? And it becomes harder and harder to do deals that move the needle over time. And so I just wanted to go back to something you mentioned earlier, which is that you see Lifco's management being a massive reason for the business's success. And that's not surprising to me with, you know, it's really a part of every serial acquirer's story. But I think it's worth digging a little more into that. And so we already covered their founder and first CEO. So how about we look at the current CEO, Pear Waldemarsen? Yeah. So pair is a very, very good CEO in my books. And the thing that's

awesome about that is that he's still quite young at just 49. So, you know, if he sticks around, he presumably he'd be, he presumably has at least another decade or two to continue compounding the business. So he has a very long history inside of Lyftco. He was a CEO of Brock, AB, which I mentioned earlier. Now, what I didn't mention earlier was that Brock is not only a robot company, but also basically a conglomerate in its own right. So from there, Pair moved on to become the head of business of the dental area and then into a role as the deputy CEO of Lifco. And then once Frederick Carlson left, as I mentioned, he was put in place as Fred's replacement as CEO. Now, since Pair has now led the business since 2019, I think using Buffett's rule of one is an excellent

exercise to kind of just see what kind of a job he's done at allocating shareholder capital while being responsible for that duty. So since Pair has been CEO, he's been in charge of allocating about 12.7 billion Swedish Krona back into the business. Now, over that period, the market is increased by about 75 billion Swedish Krona, while dividends total about 6 billion Swedish Krona. So he's produced about 6.4 Swedish Krona per dollar or per one crona retained, which more than satisfies the rule of one, which is to create at least $1 per dollar retained by that business. Now, insider ownership on Lyftco is very good as well, mainly because their founder and

their current CEO, Carl Bennett, owns just so much of that stock and it hasn't been diluted. So he alone owns about 50% of the shares, but 69% of the voting rights. So, you know, there isn't really any risk here of the business being taken over by anybody else. I will say, though, outside of Carl Bennett, the insider ownership definitely leaves quite a bit to be desired. So the second largest insider is Per Waldemarsin at 0.26%. So the Boers ownership of shares isn't really that exciting either with members owning shares all below 0.01%. So Per just recently bought 15,000 shares of Lyftco on the open market, which is obviously a good sign. But other than that, the insider ownership outside of the chairman just isn't that exciting.

On the bright side, minimal insider ownership can reflect that the board isn't excessively generous with doling out the stock-based comp. So there maybe is a silver lining there. But what we really need then is the full context of management compensation and incentive structures. And given that Lyfto has not diluted shareholders at all here, are all bonuses paid in cash? I presume that must be the case. Yeah. So let me take the management comp here first. So Lyftco doesn't disclose much about specifically the base salaries outside of its CEO.

So pair Waldemar said in 2025 made a base salary of about 34.7 million SEC. But in 2024, it was about 31.5 million SEC. And just for anyone US base, that's about 3 million USD in case you're wondering. So, you know, to me, that doesn't seem egregious at all. Just again, given how much value he's created for shareholders. Now, getting to your point about bonuses and, you know, boards of directors getting these large insider ownership strictly through getting options, as you can probably guess, given Lyftco's very high quality and the fact that they haven't

diluted shareholders, they have a pretty shareholder friendly incentive program. So in terms of Perra Waldemarsson, he had a variable remuneration of about 28.8 million SEC. So Per's variable remuneration is judged by targets regarding a few things. You got earnings, volume growth, working capital, and free cash flow. So this is a lot of money. So this. This is a variable remuneration. So this This number is capped at just 100% of base salary. Now, given the fact that he has earned nearly 82% of his base salary, I would say, you know, he's probably doing a pretty good job performance-wise. Another nugget that I found interesting was that no variable-based compensation will be paid

if a pre-tax loss is reported, which obviously makes sure that everything's running smoothly and profitably, which hopefully will make alignment between management and shareholders at a high level. Now, interestingly, executives in the board do not receive cash, but instead get these things It's called synthetic options. Now, this is very interesting. So since Carl Bennett obviously owns so many shares, like I just mentioned, he basically sold about 428,000 options to just 23 individuals inside of the company.

Now, they can't be exercised until all the way into the future in 2030. Now, I think this is actually kind of a cool way of doing compensation because the insiders really are just betting on themselves to create value to exercise the option at a later date and collect the difference between the market price and the exercise price while not diluting shareholders at all. Gosh, it's another really interesting option structure here that they've undertaken. And correct me if I'm understanding incorrectly, but I think the incentive alignment logic of it is is pretty compelling. And effectively, executives and directors only receive meaningful payouts if the share price rises above the strike price by 2030. So their upside is

tied directly to shareholder value creation. But it can avoid issuing new. shares by taking this synthetic approach. And so if Bennett is personally backing the synthetic options with his own shares or with cash, then existing shareholders would avoid dilution that would otherwise occur if the company had to issue new equity options as compensation. So economically, Bennett is sharing some of his personal upside with insiders to motivate them. That's sort of how we would think about it. And now I just want to address, though, some of Lyftco's potential competitors. As we move along, in our coverage of the company today.

And, you know, because at first glance, it does appear that pretty much anyone with $10 to $20 million and the desire to buy a niche industrial business, anybody who has that capital could theoretically compete with Lyftco in some way. Yeah. And I think, you know, this is a pretty important part to understand about Lyftco because as businesses aren't, you know, really in just one industry, you know, since they're in such a wide variety of industries, the real competitive pressure comes from other serial acquirers or private equity who want to come in and try to outbid Lyfco on a potential acquisition.

So the key to understanding serial acquires is just how they treat acquisitions after they buy them. There are some acquirers, such as those in the private equity space, who fully intend on flipping the business once it's acquired. Now, in that case, once acquired, the business may undergo some very, very significant changes. This could include things such as, you know, massive changes in culture, installing new management teams, utilizing consultants, cutting costs, firing employees and even drastically changing business models. Now, to people who aren't business owners, this might not really sound like a big deal, but to business owners who have owned a business for over a few decades and have very,

very close relationships with their employees and where their business is really, you know, their baby, this is a really, really big deal. Since a business like Lyftco is looking for long-term oriented businesses, management also tends to think long-term. So these businesses aren't managed by people who want to just sell their business while making out like a bandit while leaving all of their current employees at high risk of, you know, losing their job or being treated miss poorly. So for this reason, many businesses will actually prefer selling to a more decentralized type of business, such as Lifco. Sean and Daniel have gone

over a constellation software spin-offs and they're a great example. So the attraction of decentralization is that businesses have much less need to make these large changes once they're acquired. And that's versus being acquired by a highly centralized business whose sole purpose is to optimize margins of acquired businesses just to prepare them for getting rid of them and selling them to someone else? So we haven't spent a ton of times today discussing the economics of the individual business segments, even though there's some pretty wide variation in margins. And so maybe you can take me through a little bit better, you know, which segments are creating

the most growth and which segments are slower growing or tend to be even more volatile. And maybe just discuss the risks associated with each of these different business segments too. Yeah, great question, Sean. So it's interesting because the dental segment was a primary segment that was involved with Lifco when it was first foreign, but revenue growth in that segment is actually the lowest and by quite a wide margin. So since Lifco, IFPO, dental has compounded revenue at just 6%, whereas demolition and

tools has compounded at touch below 16%. And system solutions has compounded at nearly 18%. So the Abita Kegger for dental demolition and tools and system solutions have been 9%, 17% and 29%. But even though the dental segment is the lowest grower, it definitely has its place inside of the business. It tends to be the most stable segment with minimal deviations from its 20% EBita margins. This is due to the ongoing demand, like I think we both mentioned, for dental products. It doesn't matter what's happening in the world when you need to get worked on your teeth. It's going to take a priority. And it also happens, obviously, that dental

work is often covered by insurance. Now, the demolition and tool segment tends to be the most cyclical and volatile. I mentioned earlier that this segment currently is contributing to the slowdown in Lyfco in the last few years. Now, this segment has arguably the highest margins around 25%, but on a year-to-year basis, they actually fluctuate a lot more compared to some of the other segments around that number. So this segment, you know, it's tied to things like infrastructure, construction and forestry CAPEX. And, you know, unfortunately, these industries are all cyclical. And if they're not spending, then this segment is going to suffer both in terms of growth as well as in margins. Now, as for system solutions, this segment has the highest growth in both its topline and in cash flow.

It's clearly doing very, very well, which I think is why they're separating the reporting of some of its divisions. Just a comment on the dental division in particular, I think this is at a high level what many investors find attractive about the healthcare space. And people are always going to be sick or need their teeth cleaned regardless of where we are in the economic cycle. So there's a real stability to the earnings of these businesses that is relatively rare comparatively. But let's just go over the risks of Lyftco again as a whole. How does the company overall perform through a down cycle? Yeah, they actually perform quite well.

So during COVID, revenue decreased by half a percent. And at the same time, they actually increased their cash flow margins by about 1.5 percent. And they increased their earnings per share by 11 percent. And I think that's quite impressive during a time where, you know, the world essentially to some degree, shut down. So I wanted to share their performance during COVID because I think many businesses just suffered greatly, but Lyfco did, I think, a really, really good job at growing, albeit at much lower

rates than they had historically. So now I want to touch on some of the more company-wide risks. So Lyftco shares a multitude of different risk types. First, you have the broad risks inside of its industry and markets. You know, these tend to be kind of vanilla, you know, macroeconomic factors, customer concentration risk, technological disruption, consolidation among competitors, and then more individually is the risk about insurance being disrupted and which obviously would affect its dental segment.

You know, these really aren't super interesting to me or likely because, you know, I think all these are obviously relevant, but they would also affect pretty much any business out there, except again, for that dental insurance angle. So macro risks, as I've discussed, tend to hit the demolition and tools section the hardest. luckily, the dental and system solution segment has been relatively resistant to economic turbulence. Now, the second overarching theme of risks that they discuss are operational risks, which I believe are more of the real risks of the business.

So these would include things like, you know, having the right people in place to continue scaling the business. So, you know, sometimes the person leading a business from, let's say, $100 million to a billion, isn't the same person needed to take it from a billion to $10 billion. Now, I'm not saying at all that pair, their current CEO, isn't capable, but I'm just saying that in some cases, if you don't have the right manager with the correct experience of scaling, this can obviously be really risky once you decide to continue growing up and scaling. Now, another risk is centralization.

So in the book, the compounders, which I've discussed in depth on TIP 772, I actually went over a few businesses that for all intents of purposes are decentralized companies, but they actually experimented with centralization for a variety of reasons I won't go into right now. But basically the outcome of all that in pretty much all examples was that it was a failure. It was a failure centralizing. So because they tended to fail in that centralized business model, they all basically went back to decentralization, which, you know, ended up working very, very well. So, you know, I think in general with these decentralized businesses, if they go through periods of stagnation, sometimes they, you know, they feel that there's these drastic changes that need to be made in order to kind of escape that staleness. But from my research into serial choirs, generally going more centralized is a bad idea.

But again, I thought I'd mention that as a risk because that's something that I'd prefer not to see them take. I think you've been pretty thorough here in outlining the case for Lyftco as in addition to our intrinsic value portfolio. But obviously before we can make any decisions around that, we have to look at the value of the business and the intrinsic value. And there is no ordained intrinsic value. of a company, right? It's not like a law of nature. And so anyways, we approach thinking about

intrinsic value through this very simplified lens of looking at what the company might be worth in a bear case, base case, and a bull case, and then pulling those scenarios together into a single valuation with weighted probabilities based on how likely the various outcomes are. And so with that context, Kyle, how about you take us through your base case for Lyftco's business over the next couple of years. Yeah, so Lyftco is one of these businesses where if you assume that they just stick to what they're doing, there's a very good chance that they'll continue to get returns that they've made historically.

Now, I know most investors, myself included, tend to discount future growth. And I think that's normally a very, very good idea because at worst, it just builds in an extra margin of safety. But the fact is that most businesses do tend to fail. So you kind of have to default to that if you want to be a responsible investor. So for my base case, I assume a blended average of about 4% or gain. organic growth, slowly decreasing to about 3% in the terminal year, which I'm using here as 2030. And I'm going to be using that same year for all other scenarios as well. So I assume about a 10 to

12% in top line growth with the rest of that growth coming from mergers and acquisitions. Now, I'm assuming here that Lyftco continues to find very high quality acquisitions. And as a result, they're going to continue climbing up in Ibita margins very moderately from today's number of about 22 and a half percent up to about 23 and a half percent. Now, given the growth trajectory in the past. I think this seems very achievable in the next five years, especially with the margins on some of their newest acquisitions, clearly being very, very high and value accretive. I also assume the environmental technology and transportation products divisions, these new ones, which are naturally high margin, continue to grow and continuing raising the bar

for the entire company. Now, here I'm applying a 24 times EB to EBITDA multiple. So this has been their median multiple since 2019. And I think given the high capital efficiency and the quality of the business, if they're growing at my assume rates, this multiple is fair. Yes, it's probably kind of high, but I think it's fair. So I'm also assuming zero share dilution, which obviously has been its strategy in its entirety. So, you know, I don't think it's a hot take to say that they won't vary away from that. Now, with these assumptions, I get a price of 580 Krona, which is offering about a 16% compounded annual growth rate. But you also have to add in the fact that they have this kind of 1% dividend yield. So the returns are going to look more like a 17% percent.

percent. Yeah. So for context for listeners, that's on a basically a five-year time horizon, right? That's the expected rate of return based on, you know, if everything goes according to this base case, which, you know, of course it won't. But again, it's sort of a thought experiment. And, you know, I think it all sounds pretty reasonable. And maybe the only pushback I would give you is just like a slightly lower exit multiple

personally. Because we talked about how serial acquirers face this law of large numbers. And generally speaking, whether this will happen over the next five years on the sure, but there is this reality where you have to accept the lower hurdle rates. We saw this with Buffett and Berkshire to continue meaningfully growing business. And what that means is just that, you know, accepting deals that they previously might not have seen as being attractive or focusing on a smaller number of larger companies to make deals with. And so that just reduces the opportunity to find these really mispriced assets. And so that's why I say I might be a bit more

conservative with the business where we know, you know, unlike, say, alphabet or meta, where something like AI can dramatically reaccelerate growth, even for a multi-trillion dollar company, it just isn't going to be the case here with the serial acquire. And if growth dramatically re-accelerated, so then, you know, we might have other problems because they might be making, you know, value-destructive acquisitions. And so, again, for that reason, it's a little harder to go off, in my perspective, the median valuation multiple from when the company was, was young right, you know, like seven years ago at this point. But I'm getting a little bit ahead of myself and probably being a little too bare. So why don't you walk us through your bare thesis and how you

think about that? Yeah. So I see your point there, Sean. And one of my favorite investing books was Chris Mayer's hundred beggars. And one of my takeaways from that is that some businesses, and I believe Lyftgo to be one of them, you kind of have to suspend disbelief in their abilities. So, you know, yes, the majority of businesses will 100% have a harder time growing as they scale. But for certain businesses, you know, if they can continue scaling in a healthy way. And if your research supports this, then you can get buying opportunities in these businesses that very rarely go on sale. Now, part of the reason a business like Lyfco is such a good business is that it doesn't really go backwards. As in, you know, I don't really see a

scenario where revenue is going to decline meaningfully and the businesses just no longer generate cash. So for this reason, my bare scenario still factors in growth, albeit at a much lower growth level compared to the base case. Now, I'm assuming that we continue to see some organic growth, but it's much lower at just 2%. I also assume that they continue to make acquisitions, but M&A growth is lower, kind of more in that 8 to 10% range. I also assume that there's a continuing weakness

in some of the cyclical markets that Lifco is exposed to. Now, as a result, this along with some FX headwinds, depresses I beta margins to a touch below, you know, 21%. This assumes that margins in nearly all segment dropped by about 1% with the demolition and tool segment continuing to face additional headwinds. Now, I know I'm not reducing margins much here,

but Lyfco's margins have been incredibly, incredibly durable over the years. So since Lyfco has at its IPO, EBITDA margins have actually never decreased year over year. So for that reason, I'm using an exit multiple of about 20 times EV to EBTA to assume that the market continues giving it, you know, a decent multiple, but obviously not the same premium that they've had in the past. So given the top and bottom lines would continue growing in this scenario, I don't also model a dramatic compression in their multiple in the scenario. So in this scenario, I'm getting a value about 365 Krona, which offers a 6% return. And again, we have to add that dividends. So that gets us up to about 7% returns. We're talking a lot of numbers.

And for anybody who wants to see the model that Kyle put together and that we're talking about here, you can access it by signing up for our intrinsic value newsletter. And when our newsletter goes out on Lyftco, we'll have links to the model in there. But how about you give us the bull case here? If things can go better than expected for this business in the coming years, what would that actually mean? Yeah. So, you know, I think there's a lot to be bullish on in general for Lyfco. You know, given the current headwinds in the demolition and tool segment, I think it's fair to expect a tailwind once demand normalizes.

Plus, you factor in that the business is now focusing on these two new segments, which obviously carry very high margins and are growing faster than the rest of the business. And, you know, there's just some very good growth levers out here for the business to continue to pull on. So in the bull case, I assume its subsidiaries continue to grow organically at around 4%. Now, given that Lyfco isn't in that 500 subsidiary range, I think in the best case scenario, they could maintain that range, but it will certainly get harder as they scale. I assume that the M&A engine continues to roar and the top line grows at about 12 to 14%.

So as for margins, I see these continuing to expand as they raise the bar on the margins of their acquisitions. So at the terminal date, I'm applying an I beta margin of about 25%. So this is assuming that the higher margin segments continue to find high quality and higher margin businesses to add to the portfolio and that the businesses that are already in the portfolio are able to maybe slightly increase their margins as well. So for this case, I apply a 27 times EV to EBITDA multiple for the business, assuming that the market continues to give the business a pretty premium metric given its growth metrics

and capital efficiency. So I'm going to keep the share count the exact same while buybacks are an option that I would like for them to take. I just think with how much they're focusing on dividends, I'm not going to assume that they're going to completely change course, even though that's the direction that I would personally prefer that they take. So this gives us a price of about 78krona, which is a 24% annual return, including dividends. Now, as for the future return, I'm still applying a 20% margin of safety for this business. I flirted with 15% because I think this business is definitely durable, but I decide to keep it at 20% just to say conservative. For the bear scenario, I weighed that at about 30%

which is lower than my usual number of 40%, but just given the business's history, I think this is fair. So with all that, I get a terminal value of about 446 Krona, and this offers about 11% return with the dividend. Well, you expressed to me before the recording, Kyle, that this is a company you really have conviction in and that you might even replace Dina Polska with Lyftco and your personal portfolio. So it's hard for me to argue with that.

And like I said before, if anyone wants to keep up with the holdings in our intrinsic value portfolio and in our models. We do have a free newsletter called the intrinsic value newsletter that you can sign up for at the investors podcast.com. But yeah, I'm not opposed to making Lyfco a small position. And, you know, we're low on cash at the moment in the portfolio. So we'd have to sell some Berkshire stock, probably to fund a two to three percent position. But, you know, I don't have a problem with that. And, you know, we've talked about using Berkshire shares as kind of like a cash proxy that we can tap into when we need more liquidity. And, you know, I don't think Dan would disagree with the approach either. And so I wouldn't say any of us came away from Berkshire

a weekend feeling hugely bullish about owning the stock going forward, maybe in the same way that we did when Buffett was CEO. And so with Lyftco, there's an argument to be made that we'd be taking our position in a very mature acquirer in Berkshire and rolling that into a company with certainly more runway ahead that happens to be trading at a relatively attractive valuation at the moment. So I don't necessarily have the conviction yet. I could get there. I just need to do more homework on the company. But I'm probably hesitant to make it a full 5% holding since we target 15 to 20 companies in the portfolio. And right now we have about 16. But yeah, as a tracker position, I would very much be open to 2 to 3% allocation. Yeah. I think that honestly sounds great

to me. You know, while the returns on LyftCon exactly at that 12% mark, which is kind of what we try to go for, I think it's fair to give it a little more leeway, just given the high quality of the business and the fact that it does have a pretty good growth potential. So on your points there about Berkshire, I tend to agree with you. I think, you know, we had some really, really good discussions about Berkshire. And I think it's very, very fair to say that I completely agree with you on Berkshire. You know, it's obviously still a very, very solid company. But, you know, I would be lying if I said I'm just as impressed with it today as I was when Buffett was a CEO. So I think allocating to, you know, a starter position in that two to three percent range is a really,

really good reallocation of capital. Okay. All right, folks. So I think it's time to say goodbye. We've covered a lot of ground today. But I'd like to leave you with a quote today from Frederick Carlson, the former CEO of Lyftco. He says, the big plus for a serial acquireer with a high EBITDA growth is they release cash flow.

Basically, the best thing would be if only we had EBIT growth because sales growth eats cash. And actually, he said this one discussing Roco, a business he's been leading ever since he left Lithco. And maybe we'll have to cover that on the podcast soon as well. But given the numbers that Lyftco has generated, it remains completely relevant for Lyftco. And so that's all for today, folks. And we'll see you again next time. Listening to TIP.

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