Yet Another Value Podcast - UK stocks are dirt cheap. Why won't the boards act? $ZIG $CRW | Undervalued-Shares

Episode Date: September 11, 2026

A quarter of the companies on the London Stock Exchange's main board have disappeared in four years. Private equity keeps paying 50 and 60 percent premiums and still walking away with a bargain, because the starting valuations are broken. Swen Lorenz of Undervalued-Shares has spent the last few months writing open letters to UK boards telling them to stop waiting to be rescued and start pulling the levers they already have.I have been calling the UK an emerging market on this podcast for three years, and my problem with the trade is right there in the setup: if the only way you make money is owning the one company that happens to get taken out, that is not alpha. So we spend the first half on what would actually fix it. Swen puts most of the blame on the big domestic funds, in outflow for a decade, pushing companies toward dividends to fund their own redemptions. I put most of it on boards that own no stock, treat the seat as a club membership, and check the dividend box every year. Then we get concrete on two names. ZIGUP (ZIG), which I own a little of, has a plan that pays seven executives up to 69 million pounds if the share price re-rates, trades under four times EBITDA, and still has not bought back a single share. And Craneware, which turned down a 26 pound approach from Bain last year and now trades at 13.Swen on how retail investors can unlock the UK market: https://www.undervalued-shares.com/weekly-dispatches/retail-investors-can-unlock-the-uk-market-here-is-howHis earlier write up on UK M&A and activism: https://www.undervalued-shares.com/weekly-dispatches/uk-ma-and-activism-is-the-dam-about-to-break/This episode is sponsored by Fiscal.ai: https://fiscal.ai/yav. I am a customer and I pay for the API myself. Two things I use it for: a huge database of fund letters wired into the API, so the first thing I do when prepping a podcast is pull every recent letter on the name and see the bull and bear case, and audit-linked models where every line in the model links straight back to the source. You can get 15% off their AI connector at the link.Chapters:(00:00) Intro(01:23) Sponsor: Fiscal.ai(02:57) Swen Lorenz, Undervalued-Shares(04:30) A quarter of the LSE has disappeared(06:05) If the only exit is a takeout, is that alpha?(07:52) The levers boards refuse to pull(10:17) Boards, funds, or shareholders: who is to blame?(15:23) Active outflows everywhere, so why is the UK uniquely cheap?(16:57) Culture, and the case for foreign activists(18:25) Index funds, proxy advisers, and a 95% approval vote(21:04) The dividend trap: the board or the fund manager?(25:33) Boards as a club, and the Gamma Communications topping bid(28:07) You get what you pay for: UK board pay and stock ownership(30:03) Swen's activist checklist(32:00) The dam is about to break(34:12) ZIGUP: the business, and the letter(36:18) The VCP: 69 million pounds riding on the share price(40:19) Why I am disappointed: no buybacks, still paying the dividend(42:14) The real risk is an unsolicited bid at too low a price(43:51) US roadshows and other non solutions(48:27) Craneware: from a 26 pound bid to 13(51:59) SaaSpocalypse fears and the trading update(53:32) Closing: a golden opportunity, and whether to relist in the USSwen Lorenz / Undervalued-Shares: https://www.undervalued-shares.com/Links:Yet Another Value Blog - https://www.yetanothervalueblog.comSee our legal disclaimer here: https://www.yetanothervalueblog.com/p/legal-and-disclaimer

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All right, you're about to listen to yet another value podcast with your host, me, Andrew Walker. Today we've got a podcast I am, you'll hear. I'm fired up. As they would say in Louisiana, I'm all fired up. I don't know if I can do that accent, but I am fired up about the podcast and topic. We're going to talk today. We have Sven Larson from Undervalued Chairs. He has been publishing letters to a lot of UK companies talking to them about capital allocation, fixing their undervaluation.

And if you've listened to this podcast for the past three years, you've heard me joke, joke, quote, unquote. that the UK market is an emerging market. The stocks are so cheap there. And the only solution so far has been huge takeouts by private equity companies or strategic partners. And it's nice if you own the company that gets taken out. But as a whole, I found the experience of owning UK stocks hasn't really generated that much return because you get the big return from the takeout.

But what about the 80% of companies that aren't taken out? So anyway, Sven's been publishing a lot of letters working on them. We're going to talk about the UK market overall. What ails the UK market? What the fixes for the U.S. UK market are. And then we're going to talk about two specific companies that he's published letters on and kind of the issues, the opportunities, everything facing them. One of them is Zigg up. The ticker there is Zieg. Disclosure, I own a little bit of the company. So that is the disclosure. There's disclaimers,

everything at the end of the podcast, not investing advice, all that. But we're going to get there in one second. But first, a word from our sponsors. Today's podcast is sponsored by fiscal.a.i. Fiscal.a.i is the modern financial data provider for global equities. Look, that's what they have me tell you, but let me tell you how I've been using fiscal. Dot AI. And I'll remind you, I'm a customer. I paid with my own money to connect to the fiscal. com.

There's two things that I've really found it useful for. Number one, this is something super unique. They've got a huge database of fund letters, and the fun letters are connected by the API. So whenever I'm researching a company, whether it's researching the company because I'm interested in them or looking up an event or prepping for a podcast, the first thing I have my AI do is I say,

hey, I'm prepping for a podcast on, I'm prepping for a podcast on him. Hymns. Go to, and the first thing it does is it says, hey, here's all the recent letters on Fiscal.a.I of people talking about HIMS and here's their thesis, here's their bare thesis, all that sort of stuff. So that's the first thing. And that is really unique and that is really fun. And then the second thing I do is I use it for edited financials, right? I've got my model and I say, hey, I'm looking at Hymns. Go build me model. And it says, sure, I'll build you a model. And every line in that model has a link. So I can see, oh, they're pulling this

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I'm a big fan of the podcast. If you want to try it out, you can use my link at fiscal. a.i. slash yav to get 15% off their AI connector. That's fiscal. com. And there'll be a link in the show notes. All right.

Hello. Welcome to Yet Another Value Podcast. I'm your host, Andrew Walker, still sporting a mustache. And with me, Sam, happy to have on. I think this is actually the second time. My friend, Sven Lawrence, Sven, how's it going? Good, good, great to see you again. Last time I saw you in New York at my conference, good to be on your podcast now for a change.

It was a lot of fun. You know, we'll get there. Well, maybe not to the guy. We'll get there one second, but two things before we start. First, note that Sven writes undervalued shares.com. I will include a link in the show notes for people to follow that. And also a link to what we're going to be discussing today. and the show notes for people. And then second, we're going to be talking mainly about the UK market,

which as we'll talk about is basically an emerging market market. So everyone should remember nothing on this podcast is investing advice. And that is an international market for my domestic listener. So it's not tax advice. Consider all that sort of stuff, do your own diligence. Full disclaimers in the show notes and at the end of the podcast. All right, so Sven, the reason we're talking is you have been on a hitting spree recently of sending letters, banging the drum on something that I've kind of mentioned off and on this podcast over the past year. UK companies are way too cheap and boards and companies need to sit up and do something about it or else the UK market is going to disappear, whether it's from all of the companies going private

or just because, you know, if a tree falls in the woods and nobody hears it doesn't make a sound. So I'd love to just start kind of what's, I think you've written three letters, four letters, but what spurred this recent increase in output? Like, how are you seeing the situation? And then we can dive further into that and maybe talk about one of the two or the companies after. So I've been going on about this whole subject of the UK market being way too cheap and being the equivalent of shooting fish in a barrel for private equity companies and strategic investors for years.

And I was admittedly a bit early. I wrote about this three years ago. And recently it's been getting a lot of attention because there's been so many takeover bids solicited and unsolicited in the United Kingdom that people are now quite rightly questioning whether the market is going to disappear. If you look at the main board of the London Stock Exchange, since 22, 25% of the companies listed there have disappeared. Going privates, takeovers, I mean, it's a mixture of things.

It's absolutely remarkable. The other thing that's remarkable are the premiums paid by bidders. Usually, you know, for a decent-sized company, you'd expect a premium of 20 to 30%. But in the UK, it's often 40%, 50%, sometimes even more than that. I've seen triple-digit premiums for takeovers. And that's just an indication that the market is severely undervalued. And this is very much what's driving this at the end of the day. The UK market is dirt cheap, a lot of very attractive companies there.

A lot of companies are listed in London, but they're not so much British by way of doing business internationally. And some of them may even do the majority of the business in the United States. So you'd have to say this is de facto in a way, an American company, but listed in London. And this is where private equity and strategic investors are currently having a field day. It's easy, easy winnings. And in a way, they have it too easy. And that's why I started writing letters.

So let's start with the valuation. You know, I think you're attracted to the same reason I am. You look at these companies. And, you know, I always say like, hey, if you're, if you're doing an Excel and it says the stock is undervalued and that's the whole thing you've done, well, you're probably missing something because like markets generally aren't that easy. But the UK market kind of has been that easy with one big pushback on that I'll give you. But actually I'll give it to you right now. Like I think the pushback would be, hey, if you're doing all this Excel work and it, it says,

hey, the stocks are too cheap. And then they just languish and stay too cheap until hopefully you get a big check from a private equity firm, which is awesome. But as you said, 25% taken out over four years, let's call it. You know, I, I, I came onto this bandwagon in 2024. You were a little early in 2023. The market has not risen. The only thing that's resulting in value creation is if you're lucky enough to get your company taken private.

And on the whole, like, you know, a super cheap market, you'd think the whole thing should rise. So I think the pushback week, hey, Andrew Sven, you guys are probably, you guys might be right on a spreadsheet. But if you're only take out as private equity, it's not really alpha. You're just hoping that you get one of the lucky ones. But on the whole, the market doesn't generate a lot of access return. So I'll break that down.

a lot of different ways. But what would you kind of say to that overarching thought? I used to be in the camp of value investors, and I have to admit that I've somewhat left that in the sense that I think buying something that's cheap and waiting for the weather to change. This was Japan for 15 years, right? And if you did it in Japan in 2010 and you held to today, your return sucked. If you did it in Japan in 2000, let's say 23 in hell today, you did unbelievably, right? So it's just kind of like, yeah, sorry to interrupt you, but it just, just remind me so much of it. Yeah, well, and I'm a big believer in, you need to have agency and you need to be proactive

and you need to make things happen unless you make it happen yourself. You know, no one else will make it happen for you usually. And that's all the more true in the UK with its undervalued stocks. Someone needs to step in to do something about these undervaluations. And that could be private equity making a bit, but it could also be a board saying, what is it, which levers do we have control of? and there's a lot that boards can do CEOs, CFOs, you know, the whole management team. The obvious one always being share buybacks, if your shares trading at four times earnings

and you have a relatively low debt leverage, the obvious thing is to start buyback shares. That's one way to, there are so many options that boards have. And too little of that has been happening in the UK. The UK is definitely behind in terms of governance. This is a financial market that in terms of its size is still one of the world's largest financial markets, but in terms of innovation, governance being ahead of the curve, it's just not there anymore. It's become a bit of a backwater. And there's also, I mean, I'm not getting political here, but the UK has had a rough time for 10 years now.

We've had seven prime ministers there in a decade. This is what you used to see in Italy during its worst time or in Latin American banana republics. there's definitely an element of capitulation, depression, lack of belief in the future. And I think this has also rubbed off on governance standards. Boards are more about administering what they've got, being very happy with their board fee of whatever it is that they're charging a year. And ticking boxes of, you know, the boxes that used to tick 20 years ago,

but the world has moved on and capital allocation standards have moved on, incentiveization schemes have moved on. And the UK is just stuck in the past. That's what it boils down to. I mean, the things that happened in the United States that changed in the United States in the, you know, 10 or 20 years ago already, the UK still hasn't figured that one out yet. This is also where the opportunity lies.

I'm saying this as I'm not moaning and complaining. I'm saying there's a huge opportunity for quick wins, all sorts of re-ratings, catalysts, special events, and, you know, event-driven investing. You've got all of that right in front of you, but someone needs to do something. It's just not going to happen. out of its own, you know, out of its own energy.

No, I'm really glad you pointed to the boards because I want to go to, I think there's a lot of fingers to plan, right? There's three main constituencies to kind of a company stock price, right? Not that anybody can control it fully, but there's the owners, the stockholders, there's the board, and then there's the management team, right? And, you know, all of them are inter-correlated somehow, but those are the three main constituencies. And we'll get there. I think when I've read your writings or senior interviews, I think you point a lot of the fingers at the shareholders. And I'd love to discuss the shareholders. But I would put like 90% of the blame, I would say, on the boards.

Because I've interacted with some of these boards and everything you said is just spot on. You know, these are board members who they own no stock so they don't care about the share price. You know, the share price is 100 or 10 doesn't really affect them. I'm sure they'd like it to be higher, but they're not really incentivized. they, you know, you talk to them about capital allocation. As you said, hey, you know, dividends versus buybacks. If the stock is fairly priced, that's a discussion we can have. When your stock is four times earnings and every private equity bid is at 11 times earnings, like it's a pretty obvious thing, but the boards, they just check the box and they don't want to change it. So I guess there's

not much of a question there, but I do think there is something to, hey, again, to the point I was making earlier, this has been going on for a while now. And the boards, I don't really feel like they've had their feet held to the fire, like aside from us hoping and praying, or maybe getting activists writing letters, as you said, I love what you're saying, creature and destiny. But without that, like, what hope is there? And look, you and I are just two, two handsome men on a podcast. Like, if it's just us, like, what hope is there? Because I've been kind of surprised we haven't seen more activism and more aggressive, you know,

Dan Loeb-style medium-sized hedge fund buying 15% of a company and starting to put some heads on block. There's a lot to reply and a lot to add, but I'll start with the point where I slightly disagree with you. The boards obviously ultimately, they're sitting at the levers and they can implement changes, but ultimately the boards are controlled by the shareholders. If it's the wrong board, it's down to the shareholder to say, you guys are not doing your job. You either call it incompetent, negligent, whatever it is, you know, and they can change them. And I think, I mean, I don't really want to, I don't want to make this a negative finger pointing exercise, but But if there was one villain in this story to make it interesting,

I'd say it's probably the large corporate fund managers in the UK because they are the ones who are holding stakes of oftentimes 5%, 8%, 10% in individual companies. And if a bunch of them came to the same conclusions, then words could easily be replaced. And in a way, what they've been doing instead, I'm very much generalizing now. and there are very positive outliers among UK fund managers,

so I'm not having a go at absolutely everyone. But what's been happening among UK large investment funds is that they've had outflows for years. And to deal with these outflows, with clients redeeming their fund shares, they need to raise cash. And that's why they've often been pushing companies towards paying dividends,

even if that was a very bad decision in terms of optimizing your capital allocation. And there's certainly a culpability among UK investment funds and investment trusts who have had a hand in putting the UK stock market into what is effectively a status of, or a process of self-liquidation. It's going to disappear at the going rate. And if it's not the large shareholders who own 5 or 8 or 10% in companies that speak up and engage boards, who else is going to do it?

And that's the question you have to ask. And this is where I'm now saying, you know what, it's actually the little guy has to speak up as well, retail investors, because in their sum, they can also make a difference. First of all about being a voice that gets heard by way of just the sheer number of people. And secondly, also, if you add up their holdings. And I mean, you know, I don't need to tell you this, that many UK companies, surprisingly, besides a range of investment funds, and it's often the same names of investment funds, there is then 20, 30, 40, 50, of the shares in free float and that's, you know, plausibly are predominantly retail investors. So, you know, they are obviously there's no single party that has caused this whole

situation that the UK market is in. But I think it's now at a point where you have to ask not just what has caused this, but also, you know, who's involved in this and who's not doing their jobs. And the boards need to have their, you know, I wouldn't say you have, need to have their feet held to the fire. I'd say, you know, like constructive suggestions would help for a start before we light a fire. And shareholders have a major role to play in there and it's funds. It's retail investors and lots of parties at the table.

But everyone needs to get up and, you know, get their boots on. There were three really interesting things in that that you just said that I want to pull on. So the first was there are a bunch of large. if I could summarize you said, there are a bunch of large funds. These funds are experiencing outflows. They control tons of these companies. They're experiencing outflows. And because they're experiencing outflows, they are pushing the companies to pay dividends

versus anything else because you could imagine, hey, the company pays me cash, and then I can use that to meet my redemptions. And there's three interesting angles. I come from a domestic focus. But I'd like to pull on the three different angles. So the first is active outflows. Right. Domestically, I mean, I think there have been, if I'm looking at the U.S. or just across the world, Active has been having outflows everywhere, right? Now, the money is going into passive and index funds for the most part.

So I guess my question would be, you know, I look at the UK stats and I think UK trades for like 15 times price to earnings. And if you get into smaller companies, they trade for, it's so clear they trade under their fair value or private market value. it becomes very clear. The U.S. has hit active outflows as well. And the U.S. trades for, I don't know, 40 times price earnings or something crazy. Now, you know, earnings are growing quickly over here and all this sort of stuff. So I hate to use one metric to indicate value. But I just say, hey, U.S. is having the same outflow problem from active. And it doesn't appear to have the same valuation problem that we're having in the U.K. So why is the U.K. unique versus the U.S.? It's culture. I think culture plays a huge role in here as well.

Don't forget that the United States is the home of capitalism and, you know, taking charge of your destiny as entrepreneur as investor. And in the UK, this whole subject of using your rights as a shareholder, being an activist, speaking out is very, very different. That's before we even speak of the rest of Europe. I mean, the UK within Europe is still, you know, one of the better countries in this regard. And I organized an event in April where I tried to bring together UK fund managers and American fund managers to discuss which companies are doing things really right.

What could we learn from that? And are there possibilities to push for change? And it is very clear to me that, and I'm speaking somewhat broadly here, outside of this quite depressed mood that you've got in the UK, there's also simply a culture of taking it, accepting what's being handed to you and not wanting to be seen as raising your head above the parapay, as we say. And that does play a role. And that's why foreign activists can also play a role.

And we've been seeing the involvement of foreign activists. And they're often then seen as, you know, these aggressive outsiders and Gordon Gecko types. But to a good extent, that's also simply what's needed in Europe and in the UK in particular, because that the talent and the willingness and the ability to do that doesn't exist quite to the same extent as it does in the United States. Okay. I don't know if that talks about the valuation, but they don't. does touch nicely on the next point. So in the U.S., like, there are companies where, you know,

activists take big position and you look and you've got Carl Icon at 20 percent or choose your big name activist. But for the most part, you know, it's Vanguard. Vanguard and the two other big index funds are the companies who control, you know, 40 percent of every company on the private market. And what happens is the index funds, I mean, they don't give a fudge, right? They, they just follow what ISS tells them for the most part. And I'm wondering over in the UK, you know, you've got, it's kind of the five to seven big, big funds over there. Is it so broken? Like, how does it kind of work in terms of what they're doing? Because again, if they're all passive and you're getting like MSCI is dominating all this sort of stuff, but I don't think it's

MCI, but people that benchmark to MSCI, like, is there a advisor who could kind of change this or who could really move the needle? These advisors work in the United Kingdom as well. And one manages to speak to them. But to give you a couple, example. Earlier this year, I got involved with a activist case where small real estate company listed on the main board of the London Stock Exchange, where speaking figuratively, the management was stealing everything that was nailed down. I mean, it was just latent. And Foxy advisors did point out that there were issues and management still got 95% approval rates at shareholders meetings. So, you know, clearly something is broken. And I don't claim that I can,

I can explain every single move on the UK market when it comes to voting behavior and fund managers doing or not doing their job. But just by way of observing what's going on, you sometimes just have to say, I mean, guys, have you lost your mind? How is it possible that some executives and boards are blatantly ripping off shareholders and no one's doing anything even when proxy advisors are gently pointing their finger towards it? So yes, something is definitely broken. And maybe raising awareness is something that helps. Maybe this podcast does something in this regard. More people are now starting to speak about it. And again, this is a huge opportunity.

We're not just pointing the finger at a problem here. It's also a huge opportunity that you can use to generate value by being active and by suggesting change and making change happen. And that's really what the UK needs. I think we need a path forward. We don't finger pointing to a certain extent. But then it's, you know, what can we improve? can we do? What are the levels we can pull? There's so much value to be created. And that's,

that's really what I would love more people to focus on. No, it's interesting. I mean, in the US, you see it too. You're like, how are people still voting for this board? And I've seen some recently, I mean, I think ISS and these guys, I think they're so far, they're so slow, like they don't recommend against boards and stuff until it's just blatantly obvious that it's terrible. But I've seen examples recently where ISS comes out against a board for an activist. And ISS is basically saying, you know, they flowered up more than this, but they're basically saying, hey, guys, this board is bad actors. They are stealing from you. This management team's terrible. And the management team still somehow gets 40, 50 percent. I mean, I've seen them win. And you're like, who is voting

for these guys? It's crazy. There's one more contention in your thesis that I wanted to go, because it kind of ran counter to my experience. So you said, hey, these UK funds are experiencing outflows. So they are pushing for the companies to pay dividends. So they're, that they have cash to experience outflows. And that has gone a little bit against my experience in two ways. Number one, when I've talked to the boards, it seems like the boards are very much invested in paying these dividends, right? And when I've talked to maybe fund manager or something,

I don't know if there's so much pushing for dividends for the liquidation. What I've heard is there used to be a lot of big UK funds that either were mandated to invest in, or sorry, big dividend focus UK funds. that had a lot of shareholders. And because they had so much capital, they could only invest in dividend companies. And if you were a company that paid a dividend, you got the big UK dividend funds in your stock and you got a big stock price. And I think like kind of the big UK dividend funds have shrunk a lot.

And I think the companies and the boards haven't responded to that, right? So I could be wrong. But my contention has been, I think the boards are checked the box dividend. And part of the reason they are that, and there are a lot of reasons. But part of the reasons is they're stuck in a you said, it 10 year ago mindset where, oh, if we pay the dividend, there's all this big money that's going to come to her stock. Well, the big money's gone, but they're still in dividends and they're not thinking about anything else. So I don't know because I haven't really heard a lot of fund

managers say, hey, I need this company to pay a dividend. I mean, if there are a dividend-focused fund, yes, but I haven't heard a lot of fund managers be like, I need this company to be a dividend. Most of the people I've talked to have been like, I wish this company would cut it, but it feels like the intransigence is at the board, not the shareholder lover. So that was the last thing that thought was interesting there. I actually agree with that. And there's a multitude of actors. There's never a single easy explanation for any of this. And what you just said leads me back to one of my favorite subjects, which is culture. And different countries just have very different cultures. Different financial markets have different cultures. And this whole dividend subject is something that

was very much something that investors across the board really aspire to in the 90s and the 2000s. getting a nice dividend was a thing. And what changed in the 2010s is this enormous, this incredible undervaluation of the entire market where you just have to say, sorry, guys, we've been paying you a dividend for 20 years. And for the last 19 years, we've been shouting from the rooftop. We've got this great track record in paying a dividend.

Tomorrow we're basically going to negate everything we've said for the last 20 years. We're going to cancel the entire dividend and instead we'll buy back stock. That is a bit of a, you know, a shock chain. and systems and countries and cultures don't change very quickly. So I don't disagree with you. There's a multitude of factors, and that very much plays into the whole equation as well. I will say, like, the other thing is I see some of these results.

And again, this is where the opportunity lies to change something quite easily and quite quickly, because implementing change when it comes to capital allocation doesn't require you to fire 10,000 employees and have them find new jobs after you've been in the media as the company that laid of lots of staff. These are relatively easy and straightforward changes that you can implement at the stroke of a pen almost with good advisors. So then, you know, do all the work to get tender offers for shares, you know, done at a largest scale if your share buyback at such a scale.

But this is where the opportunity lies in the UK. And it starts or, you know, in a way, it just has to be done by the boards. And shareholders can change boards if necessary. And the boards like, look, again, I've got a very negative view of a lot of these boards. I think they're there to collect a paycheck and they treat it like a board membership as a club. And like once you're in the club, you're protected and you're so much smarter than these shareholders. You know, and you're like, hey, guys, you guys don't own any stock. The share price is down 50% over the seven years you've been involved.

Like maybe you should take some advice or like listen to the shareholder owns 5% of your company. and like the only way they get a return is the stock going up. But, you know, I also wonder, I'll give an example that I think is nice and you can riff off this. But, you know, I look at these results in the takeouts. And I wonder what that's happening. So gamma communications is a stock that I had a small position in. And they ran like a six to eight month long strategic process that resulted in them getting taken

out for an okay premium about two weeks ago, right? It was a nice premium if you were involved before. they announced this strategic review. It was an OK premium if you didn't. So it's not like I'm smashing the boat on some big winner, but they ran a six, eight month strategic process. They announced a definitive deal, signed merger contract. And then a week later, there's a UK Times article that says, hey, another private equity firm is going to come out with the topping bid, right? And you look at this. And that's great, right? The company's going to get hopefully more value. But you look at this, you're like, they ran an eight month process and a week later,

another private equity firm is coming out with a topping bid. Like, why didn't they just go with the other private equity firm to begin with, avoid all the legal fees, the break fees of the first thing? And I don't know the whole story, right? It hasn't finished. We haven't seen any of the docs. But I've seen stuff like this before. And like this is like the third time I've seen a company sell themselves.

And then a week later, someone go for a bigger premium, which it does speak to the undervaluation of the market in general, I think. But you're also like, what are these boards doing that they're signing definitive deals with not the highest bidder. Like they ran a full strategic review and there was another guy willing to pay that much more a week later. Like, what are these boards doing?

I just don't understand what's happening here. Well, to, you know, defend the boards for a moment, I'd say there's very much an element of you get what you pay for and board members in the UK are not well paid either. So the quality of board members you get, it's not all that great. And, you know, someone who's a board member of company XYZ in the UK, may not have the experience to deal with such a strategic process in the right way,

simply because that company hasn't been hiring a candidate who's got the experience with that. You know, that's something I would look at. But this- Can I pause you right there a quick? You say you get what you pay for. I will say U.S. board fees, I think, are about four times to seven times higher than UK board fees all in for a company as a similar size.

You could correct me wrong. But I don't know if U.S. boards are that much better. So I don't know if it's you get what you pay for. I think it just might be it's not going to. all around. You can correct me or you can continue. Sorry. I'd say that may be an aberration to the other side of the extreme.

But, yeah, ultimately, boards are currently in the UK, many people are very critical of the work that boards do. And I've got nothing to add there other than shareholders have it in their hands to change them to hire different boards to pay them more to incentivize them in a different way. Just as executive compensation for CEO and CEOs and CFOs wasn't, you know, up to scratch in the UK for a long time and still, you know, has a lot of improving to do. The same is true for boards, you know. Why is any board member allowed to not own any stock in the company?

You know, I just simply wouldn't allow that as a shareholder. You know, it's so funny because when you talk to these boards, you, I've heard multiple times, hey, you guys don't own any stock? Like, why don't you put a stock growing up? And I've actually heard several boards say, we think it would be a conflict of interest for us to own shares. I'm like a conflict of interest for you to be aligned with shareholders, but it's so funny.

I don't know how they got that in their head, or maybe they're just saying that because they realize it's a good line to not have to go buy stock. But it's so crazy to me. And I've heard it from multiple different companies and multiple different directors. I've been on boards. I've also been on boards of charities. and especially at, you know, nonprofits in the UK, that's the standard line.

If you want to get out of something, you say it's a conflict of interest and everyone is really startled and scared. Well, but that's a, I mean, yes, you are 100% correct, but like a nonprofit, you can't own stock on it. So it's okay. Let me go to, you've got an activist checklist for looking at UK companies that I thought was really good.

Do you want to, it's a pretty quick one, but do you want to quickly go through it? Because I think it kind of lays this. lays out the opportunity for people who are just looking across the board pretty well. Oh, one second. Factors that we like to look at is very much capital allocation, governance, investor communication, removing structural blockers, slightly more complex subject, but, you know, there's a lot of that. And then executive compensation.

And once you've looked at these various factors, you can pretty quickly draw up an initial assessment, whether there's something that has to be discussed in a more serious way between shareholders and boards. And nowadays, obviously, you've got AI. The ones that I saw, and you can correct me from wrong, but the ones I saw in your article were, like, you want something, market cap between 250 million pounds and 2 billion, you want something with no dominant shareholder, you know, so that you can come in. You're really looking for something where there's the cluster of mutual funds who are at 5% to 8% each, because then there's no dominant shareholder, but there's also,

hey, if I can go making compelling pitch, get three to four of these guys on my side, we can change the whole board pretty easily. And you want the board that owns no shares because everything we're talking about, you can make the case pretty easily. These guys are conflicted, all this sort of stuff. Add all that together, tie in a company with a low valuation, hopefully some cash flow that you could shift from dividends or whatever the F they're doing to share buybacks.

And that's kind of your standard activist playbook because you can have the share buyback lever. You can have the let's sell the company. you can have the let's incentivize management, so you've got a lot of different lovers. Would that be kind of a good summary? That is a good summary. To that, I would add that it is extraordinary how many companies in the UK, public companies actually fit that profile. Because normally you think, you know, this is, it's a rarity to find a company that ticks

all of these various boxes, or at least most of them. And in the UK right now, it's like shooting fish in a barrel. And that's what the market has really woken up to. And I published an article last week where I basically said that the dam is about to break for M&A. in activism in the UK because I've been going on about this for years and most of the time it will say yes, Sven, that's a nice idea, but not all that much is happening there. And suddenly all hell seems to be breaking loose and the subject is all over the media, almost on a daily basis.

A number of other players have spoken out as well like MNG, the fund management company, 500 billion dollar fund manager. They've come out with a statement saying that too many UK companies are sold off at too low price. So this is not just mean. saying this. This is now actually the establishment waking up and saying there's something wrong here. And suddenly, I can sense possibly in the next couple of months, maybe it might become a fashionable subject

to associate yourself with, which could then lead to a lot of change very quickly. And we may be surprised on the positive side with the UK suddenly changing because usually things take a while to get enough attention and awareness and then things can change quite quickly

because none of that is all that difficult to implement. I mean, Japan, people talk about it for years. And then once the, once the changes happen, I mean, it can go fast. And the thing about undervaluation is you can cure it really quickly, right? Okay, if they don't want to sell for huge premiums, you can get the share price up pretty darn quickly by if your stock's undervalued, buy a lot of share, cancel the dividend, do a big tender offer. Like, you can, you can fix that pretty quick. Let's turn to one of the companies. I mean, the proximate reason for this is, again, you've written a lot of letters, but I think we're timing this podcast to launch with a letter to a company that you're writing. The company is Zig Up. This is the former Reddy Northgate. I actually own a little bit of this company.

I'll just kind of toss it over to you. What is Ziggup and kind of what are you pushing them to do in the letter? So it's a company that provides what they call mobility solutions. I call that they're renting out commercial vehicles. If you want to move house, you need a white van, a man with a van. Then ZigUp is a company to call they've got the largest market share for the rental of commercial vehicles in the UK. They've got specialty vehicles as well, like things with refrigeration and stuff like that. They also do a whole range of services. They provide a range of services that fall into that same category, like fleet management for corporations, claims management in case of accidents,

and replacement vehicles for accidents, that sort of thing. They're the largest such operator in the UK. They're growing nicely at single-digit rates every year, and they're also operating a business like that in Ireland and also in Spain. And after the merger, Reddy and Northgate, you mentioned it in 2019. They obviously had COVID to deal with. So there's been a period of significant change and external complications because of the pandemic. And then the whole boom from the pandemic obviously cooled off as well.

So this company has had its fair share of challenges as well. But management, and let me just say this very clearly, management has done a very, very good job executing, making sure that this business is successful and it is a good business. It's just so damn cheap. I wrote about it in October last year already and it was trading at three times EBITA. And right now the share price has gone up a bit, but it's still below four times EBITDA. And this is the business that's under levered as, you know, in my view and we can talk about that a bit further. and it's just screaming out for a share buyback. And I've written a letter to the board saying, you guys, you know, my suggestion is I strongly suggest

and I really advocate for looking at your leverage ratio, paring out share buybacks, ideally a tender offer, do something about your capital allocation. So much other stuff at your company is going so well, but your share price looks like it's not going that well. The share price has gone nowhere for 18 years. No. That is very true. I want to ask some questions about that. But before, I mean, the reason I got interested in here, and I think something that really helps stage this is they have the VIP plan or MIP plan,

whatever you're going to call it, the value incentive program that they gave to management. I got involved because this is really, it's not unique in the U.S. though it's a signal I really look for. It's kind of my corporate dark art signal, but it's really unique in the UK. So do you want to talk about the VIT plan and then I can kind of follow up with my question? after we set the groundwork with that? Yes, so very unusually they've implemented the, they call it the VCP, the value creation plan, where seven senior management members are incentivized

to get the share price up. And the way how it works is actually quite simple. Above a certain hurdle, which is a share price of 521 pence, they get 10% of the added shareholder value up to a maximum level of 800 pence per share. That's where it's capped. and they get, you know, if this bonus materializes, they get it issued as shares and then there's a lockup on these shares, but in a way that's detailed.

The interesting thing is that the seven management members can earn a total of 69 million pounds in bonus shares. The CEO would receive up to 19 million pounds of that. The CEO has been running this company and the predecessor for many, many years. He's 59. So this would probably be a very nice reward ahead of a potential retirement at the latest state. stage. And we're speaking big numbers here. I mean, a 69 million pound bonus split between seven people is a transformative amount of money for most people who are in employment. It is a very simple system and it immediately gets across why this is good for shareholders because

they only get anything if the share price is at least at 521 pence. Right now it's 430. and it's all on a very tight timeline. They have to deliver this until April 28. This whole thing was put in place a year ago. So we're already a year into it. And it's amazing the share price hasn't reacted more strongly to it, in my view. I think this is one of, I mean, you're the man for the dark arts of incentive schemes. But I think this is such an incredibly powerful signal that I'm amazed the share price hasn't reacted to a much bigger extent.

But here we are. and effectively looking at a business that's leading in its industry, it's growing, it's been at an inflection point for its free cash flow. Last year, free cash flow rose from 17 million pounds to 96 million. And they're now looking at getting this above 200 million by 28. The company is also a potential platform for private equity to come in and consolidate the industry. They're the market leader. So, you know, this is just waiting for a private equity.

player to step in. I don't think in two or three years this will still be an independent company. I think someone will have made a bit for it. And this is where the danger lies, but also the opportunity, they have to somehow get their valuation. They have to get their share to rewrite and trade at a higher multiple because otherwise it's just gifting money to private equity because they're going to get way too good a deal and that's what we have to avoid. So that's perfect. And as you said, the reason I got an interest here was, I believe mutual friend pointed this out and I was like, holy smokes, I've looked at a hundred UK companies and I've never seen a VIP plan like this before. I can't, I want to call it a MIP plan. I think

it's BCP, but I'm just combining them. But I've never seen a plan like this before, except one other friend pointed out one other company that had done in like the past 10 years. You were going to say something? Go ahead. Yeah. And I mean, just to, you know, give credit where credit is do, I believe some UK fund managers had a hand in. this company implementing. So, you know, it's not like I'm bashing the entire fund manager sector. There are some very good outliers in there. And this was a case of positive investor engagement. That's almost certainly true. But, you know, I don't think, at other companies, I think shareholders have pushed for something similar. And this was the first one I saw that implemented. So I got really

interested. But I will tell you, I have been a little disappointed by the company, because what I thought was going to happen, you know, and I probably bought the shares about a year ago. when I saw the plan. And the plan, I mean, the stock was like 300 when you did it. It needs hit like 520 in the low end. I was like, oh, just hit the low end, just to start accrued money, the stock's got to do like 25% annualized from here to the end date. That was kind of what triggered me and took me from this is just your typical UK cheap

company to this interesting. But I've been a little disappointed because they have not bought back shares since they announced it. They've announced buybacks, but I don't believe they bought a single share since they put the plan in place. They've stuck with the dividends. And I'll talk about their IR strategy in a second, but they've invested into this Spanish platform into some growth assets that they say are really good. But I keep hitting them with, hey, everything is opportunity cost and your stock trades below book value. You're saying your stock trades way below private market value.

I understand you might have an attractive growth opportunity, but that is a risky growth opportunity, you know, investing into this new market. Buying back stock is not a risky opportunity. selling the Spanish assets, that new market we're talking about, where they will tell you that they think those Spanish assets are massively massive value, worth way more than book value, selling that to a private equity from when everyone says there's a private equity bid, and buying back more shares are taking advantage that, like, all of these are options and haven't really pursued them.

So I've been a little disappointed in the last thing I mentioned, dividends. They pay out a pretty big dividend, which is nice, but they could be buying back shares, and I've pushed them, cancel the dividend, and buy back shares, and it's just falling on deaf viewers. I've just been a little disappointed where they put the plan in place, and I thought it was off to the racist, shareholder-friendly, let's go. And I haven't seen that so far. So I have one other thing I want to talk about, but I'll kind of pause there.

I agree with everything you said here because these are the obvious observations that I think any objective observer would draw when they look at this particular company. I wonder whether yet again there is an element of, first of all, not being pushed enough by, or let me address another point. We just mentioned risk, you mentioned risk quite a lot. And I think what companies are forgetting often is the risk of being taken out by an unsolicited bit at way too low price. Because this company, again, Ziggup, doesn't have any dominant shareholders. There are a couple of funds. They own between five and nine percent at the maximum. And these are funds that will have usually dozens, if not even

more than that of different positions in their portfolio. And if someone comes in tomorrow and offers, say, 50% above the current share price, they might moan a bit and ask for 60%, but then the whole thing will be sold. And it will be yet another case of a UK company getting sold way too cheaply. And again, I'm not the only person pointing this out by now. It's even the establishment is waking up to this. And the risk of being bought and being taken over by, you know, through an unsolicited bit even at way to lower price, that is a major risk that boards need to consider as well.

Borts are not in the business and are not supposed to just give gifts to private equity firms and to financial investors. They are working for shareholders and not for acquirers. I'm laughing because if somebody came in and offered a 50% premium, I would say, oh, that's way too cheap. And generally I would actually be like, you just run a full process and sell the company. But I'm also, I've just become increasingly of the opinion. over the past few years. If somebody offers a premium, you say, great, have it, and I'll go find the next one, because I've just, I've seen too many people, and we might finish this conversation up with

one example. I've seen too many people say, oh, that premium, it's way too cheap. And then two years later, oh, my God, we wish you could have sold. But the other thing I wanted to mention was Zig Up, and then we can move on to the other company. And I'm picking on ZigUp here, but it is emblematic of UK companies across the board. You know, the way I've seen them, you know, shareholders, are hammering them. You're too cheap. You need to do something. You should buy back shares. And that's my

opinion, but I think a lot of shareholders have made that. And I've seen UK companies do this and US companies do it too. What is their solution? I mean, they hire a corporate broker and if it's a UK company, they go to a US roadshow, right? And I just, I don't understand it. You know, Zigup, you are a UK and Spanish focus company. You don't have any US assets. Your stock is too cheap. You have levers you can pull. And instead of pulling any of them, you spend money to hire a broker and then you fly your whole management team to the U.S. road show to pitch to a lot of investors who like don't know the intricacies of the U.S., the U.K. market. And again, I'm picking on Ziggup here, but I've seen three dozen UK companies do it. And I just, I don't understand who's giving them in this advice or

why they think it's a good idea. For a start that enables them to tick a box. I actually thought it enabled them to get a free vacation for their And I was about to say And the second reason is because they like going to the United States on corporate expenses And taking investors to nice restaurants, etc., etc. That, you know, these things play into decisions like that Without, you know, I'm not looking at any particular company But it's normal that these circumstances play into such decisions.

And the other thing is that I mean, if you're not looking at any particular company, you're a corporate employee who hasn't found the business, you're not the founder, you're not the major shareholder. Investor relations is not something that necessarily is like your favorite subject to deal with and you're probably very passionate about your business. And then you also have to do investor relations. But you already have a permanent capital base because you're public company and it's not like they need to raise more capital. So they're doing this as a bit of a box ticking exercise. But the question is, is their heart in it? Is it done consistently? Is it done with the right audiences, and I would just simply question a lot of that, which just only further adds

to your criticism. Yeah, I just, they do it. And I'm just like, look, it's nice. You're trying to get new buyers, but you've got all these levers in place you can do it. And there's a real expense here. I mean, the biggest expense is you fly the whole management team out. It's actually their time. They're not kind of running the business for three days.

They're doing this trip. But, you know, the tickets, the dinners, the hotel rooms, like, it all adds up. And I just, I'm sure I won't get invited to the next one. But I've seen so many. companies do this and it's just mystifying to me why they think this work. Last thing I'll say, the VC people, I was kind of having Claude do the math for me while we chat. If the CEO maxes out, he earns more than 10 times his annual comp, right? So he can get more than a decade worth of comp for hitting the max out of this. And as you mentioned, he's at it,

it would be, it ends in 2008. He'd be in his early to mid-60s. It would just be a perfect time. max out, sell, so all those shares vests, sell for a big premium, hit the road. And probably take some of these cushy board seats we've talking about on the way out. Probably the business will be sold one way or another. The question is, is it sold through a process where management really maximizes the value or does an unsolicited bid come in at some stage? And, you know, if you do the math, right now in Australia, there is a similar company called fleet partners. that is managing fleets as well of commercial vehicles.

And they've had three competing bids and a possible fourth bid was even rumored as well. That goes to show the attractiveness of this type of particular company. And I think it's only a matter of time before something happens at Zigab. The question is, is it driven by the board in a process and really focused on maximizing value? Are we going to get 10 pounds a share? Or are we going to get 8 pounds or, I don't know, 6 pounds, 50 or, or five pounds 50 because right now this thing is at four pounds 30. Let's turn to craneware.

And then we can kind of wrap this up. But I'd love to briefly discuss craneware because I think it's got a lot of interesting things that we've talked about throughout this process. So I'll let you describe craneware. But the really interesting thing to me here is craneware is a company that got an offer at a big premium from Bain in July of 2025. you know, the stock, they offered, Bain offered 2,600 per share. And fast forward to today and this stock has stumbled and is trading at about $1,300 per share.

I say $1,000, whatever. But you can give the overview, but I think that's a really interesting, it's a really interesting example of a U.A company that had a bid, maybe stumbled. The valuation is quite cheap on a whole, but it's got some SaaS fear. So I thought it was just an interesting one to discuss real quick. Yeah, and it's a fascinating business because it's a UK company based in Edinburgh, Scotland, but 95% of its revenue comes from the United States. So you have to ask, is this really a UK company or is this an American company that just happens to be listed and based out of a, you know, a UK on a UK market?

It, they were set up in the late 90s and they're producing software for United US hospitals. They're helping make hospitals be more efficient when it comes to delivering healthcare to their patients, but also in terms of the operation. And I'm not an expert for that sort of software, but they're now installed in 40% of the United States hospitals, number one leader in this field, by far, which goes to show they're certainly doing something right. The company has put out some projections or calculations saying that basically they could grow by a multiple, five or eight times their revenue, over.

a number of years long term by, you know, selling more software to the same hospitals. There are more solutions that these hospitals need, by also selling it to pharmacies and by capturing more market share. And they're basically aiming very ambitiously to basically say, every single hospital in the United States need to have our software. And they're in 40% now. So it's a target that's to be at least taking serious and commended for being ambitious. and a year ago, Bain, as you said, offered 26.5. They didn't really offer. They went public with, we're considering an offer at 26.5.

And the board and a variety of other key players basically screamed, this is way too low. And they were probably right at the time. The share, I think, went up as far as 22 or 23 pounds. And the offer was turned down as fundamentally undervaluing the business and its prospects. and it then fell to 12 pounds. We're currently trading at 13.5. So it's basically half in a year. And what's played into that is obviously the SaaSpocalypse,

the fear that AI and someone will vibe code a software that will replace what craneware does. But I think the market has now calmed down and has recognized that, I mean, if you have one particular client for software that is probably extremely resistant to changing an existing system that has been in place for years or decades and which staff has been trained on,

then it's probably U.S. hospitals and, I mean, government in general. And it's probably a matter of time before another bid comes in. Again, the question is, what does the board do to maximize it? No, I think that's spot on. I mean, this one, it just jumped at me as interesting because you had the bid last year, right? That is way above. But then it also plays into my priorities of you get the premium bid, you take it, because I don't think anyone saw this SaaSpocalypse coming.

And then the other really interesting thing is, you know, UK companies, I hate this trading update where they give you a little color, but not a ton. You know, they come out in July and they say, hey, our FY26 earnings are going to be kind of the same as FY25 for memory correctly. And they say, we had some deferrals late in the quarter that, and I think they run on a July or June year. So the FY26 is over and end of the summer, FY27 is we're in it right now. they say, hey, we had some deferrals that pushed everything back from 26 to 27. So on the one hand, you look and say, hey, FY27 is going to be great. But on the other hand, I mean, every SaaS company that is actually getting killed by AI,

they all say, oh, our customers are just holding off a little bit? And you kind of start to wonder, hey, is this an AI apocalypse name? Like, are they actually getting impacted? And it's just a fascinating example across the board of the big premium offer. This trades way cheaper than any listed U.S. SaaS company for the most part. trades for, I mean, I'm sure you can find one or two examples. But they've also got the Saspocalypse spheres and just an interesting push and pull of all these different dynamics. Yeah, now imagine if someone offered, say, 20 pounds tomorrow, I think a lot of people would

be tempted. Not the least because, you can just take that money and reinvested into something that's equally cheap. That's why I think the candy shops would always give. You offer a premium. I hit it and I'm just going to, you know, I'll find the next one. Spend, this has been great. I'm going to include a link. I believe we're taping this. What day is it? September 8th. We're going to release this on September 11th to time up with your Zig-Up letter. So I'll include a link to the Zig-Up letter for people who want to see it. And then probably a link, you can send me whichever one to one of your UK articles so people can see that too. But anything else, we should be talking about. Any last thoughts for people who are kind of exploring the depths of the emerging UK markets? I think the closing message should really be one that this entire conversation is about. a golden opportunity that's in front of us. This is not about blaming anyone, about moaning and doom-mongering, etc., etc. There are so many levers that UK companies and their boards and their executives can pull to create additional value for shareholders, which would do something for

the wider good of the country as well, and the finance industry. And the city of London is obviously very important for the economy of the UK. And I think a constructive, open-minded, positive-minded, conversation is to be had in the UK among key players, potentially with some Americans at the table as well, because you guys are always ahead of the time. And I think some great stuff will come out of it. And probably in two years' time, we look back at this conversation and say,

it's just incredible. We had all these undervalued opportunities. And then the whole UK market suddenly woke up and things changed overnight. And that's really the outcome I would like to see, you know, 24 months down the road. And, you know, the other thing, if I can just add one thing that I meant to mention, you know, I see a lot of people say, oh, the UK market's so cheap.

We need to get all these companies off the London market and onto different markets. And as you said, like, hey, that would suck for London. You lose a lot of that. But a lot of these companies, you know, a zig-up, they're London-based. They kind of belong in London. Now, a craneware, that has a lot of U.S. revenue. Like, one option we didn't talk about that I just wanted to float out there and maybe this will be a two-be-continued. You know, like a craneware should probably look at their stock price to say, hey, is the London market.

has deserted us, maybe we belong on a U.S. listing. Like, that's one, one other option for the company that you've, you know, published a letter to that I think exists for them that I wouldn't recommend for other ones, but I just, it's another interesting thing. And it's another reason that boards probably need to take, boards, the country as a whole needs to take seriously, hey, we need to fix these undervaluation problems or else we've gone from 1150 to 900. We're going to get down to 700, 600, 600, 500. There's not going to be a London exchange anymore. Yeah, that just about sums it up. And I would say this whole. opportunity of relisting companies in the US is something to be looked at very selectively.

The track record for doing this sort of thing is very mixed. So it's not like you just relist and then suddenly, you know, you get re-rated. It just doesn't work like that. It makes a lot of money for advisors, which is why sometimes these things. No, but people think it's a pansea and there are cases where it really works, but I think I'm with you. Selectively is just a perfect term. Anyway, I'm going to include a link to all those in the show notes.

Sven, thanks for coming on. Chat soon. Thanks, Andrew. It was great speaking to you. A quick disclaimer. Nothing on this podcast should be considered an investment advice. Guests or the host may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial advisor. This family is on the brink of Civil War on September 18. Mobland. The hit original series is back on Paramount Plus.

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