Thread by @_inpractise

THREAD

History of Addtech AB.

A Swedish distributor that has been compounding for over 100 years

$addtb

Arvid Bergman and Fritz Beving were both born in the late 1800’s and met studying engineering in Germany.

After short spells working in both Germany and England, their experiences led them to foresee rapid industrialisation in Sweden.

This idea led to a partnership, Bergman & Beving, to import and distribute technological supplies in Sweden.

This business model is largely still what Addtech does today and has proved the test of time over the last 100 years.

In the early 1900's, Bergman & Beving were effectively a monopoly serving Sweden with imported industrial products.

After WW1, Bergman & Beving moved into more advanced products and hired qualified engineers as sales reps.

More advanced products + higher services element = HIGHER MARGINS

After WW2, Bergman & Beving had their first taste of the aftermarket business after selling electronic measuring instruments from Danish firm Radiometer.

Advanced products + services + aftermarket = BIRTH OF VALUE-ADDED DISTRIBUTION

In the 1980s, global free trade broke down the monopoly structure of agencies.

Bergman & Beving focused on niche electronics, data and medical tech and doubled-down on value-add strategy.

By the late 1980’s, Bergman & Beving had 55 subsidiaries and was the general agent for over 300 companies globally.

They focused on niche products and would only manufacture products with long lifetimes that didn’t compete with imported products.

Bergman and Beving grew so large they spun off separate divisions to spur the entrepreneurial spirit as standalone companies

This led to:

Lavercrantz AB = electronics
Bergman & Beving = tools
Addtech = power, transmission, life sciences, automation

Addtech epitomises a successful, value-added distributor

A history of selling advanced products + services leads Addtech to acquire the knowledge to build proprietary products = HIGHER MARGINS

Addtech has lasted over 100 years with a culture of embracing change, relentless customer service, and innovating to meet customer demand.

Now Addtech is diversified across end markets and solutions and delivers a sustainable 10% EBITA margin with over 60% FCF conversion

Revenue is growing consistently + 15% with a huge runway

From the 1960's to 2000’s, B&B carried out 200+ acquisitions of mainly small family-owned Swedish businesses with < $10m in sales.

The pace they acquire businesses is incredible

A playbook for 'value-added distributors' that compounds over time:

Fragmented supply base
Exclusive distribution agreements for advanced products with a large aftermarket
Build knowledge to own prop IP
Bolt on assets at < 5x EBIT