Insights from a fast-growing buy and hold investor – our appearance on Mark to Market

Mark to Market is one of the leading data platforms for M&A advisors, investors and corporates – so when they hold an investor up as a great example to their audience, it’s a mark of approval that really matters.

Last week, their co-founder and CEO Doug Lawson sat down with our CSO Dan Franklin to discuss the strategy and focus that’s made handl Group one of the UK’s fastest growing buy and hold investors.

If you missed the webinar, don’t worry. We’ve summarised Dan’s key points and takeaways for you.

Key takeaway 1: Long term growth is our goal

The first topic covered was handl Group’s key point of difference. Our buy and hold investment model.

While some investors buy businesses with the intent to sell them on for a gain, we approach things a little differently.

Dan explained how we use our experience as senior operators to be supportive to the businesses we acquire rather than just financiers. It’s about prioritising long term success over quick, successful exits – creating value over the long term and helping our businesses seize new opportunities.

It’s an approach that’s paid off for our portfolio – that has seen consistent growth – we’ve deliberately expanded from five market segments to over 45 to de-risk and build a robust platform for growth.

As Dan explained, our investment decisions are based on our ability to contribute operational expertise and really push businesses forwards. By bringing our experiences, contacts and knowledge to the companies we acquire, we can help them to grow more quickly and add real value.

Key takeaway 2: Flexibility is crucial

When discussing our investment criteria, acquisition strategy and evaluation metrics, one word came up time and time again.

Flexibility.

While we do have set baselines when it comes to our acquisition strategy – centering on a minimum of £0.5m EBITDA as an indicator of future earnings – it’s equally important that we’re enthusiastic about a company’s potential and are aligned with the vision of the management team.

If we can tick those boxes along with our other criteria, we find a way to make deals, creating unique deal structures that mean every party gets what they need out of an acquisition.

That flexibility expands to performance metrics too. Profit is the most obvious performance metric, but a focus on immediate returns could lead to missed opportunities. Backing a business with a compelling model and offering, one that can disrupt the marketplace to reach new customers, can often lead to higher profits in future. That’s why handl launch and back services that can open up new markets over time, as well as those that can generate instant returns.

Key takeaway 3: The current market is creating opportunity and pressure in equal amounts

As Dan and Doug’s conversation turned towards the current financial climate, Dan identified areas for both optimism and potential concern in the coming months and years.

Firstly, economic pressures and a lack of both visibility and certainty around how those pressures will develop in the short-medium term (the lack of detail surrounding potential incentives from the “Keep Britain Working” paper as an example) are driving an increase in M&A opportunities due to business owners now considering earlier exits.  This level of economic pressure and uncertainty also is reflected in business valuations at the moment, which is highlighting a general downward trend.

But that’s not to say every value is suppressed. A combination of dry powder held by venture capital and private equity, coupled with attractive opportunities that can demonstrate high growth potential means that for the right companies, impressive valuations are still highly possible.

In a variable climate, many of the factors that inhibit growth and valuations can be overcome by businesses backed by the right strategy and revenue potential.

The key point for owners looking to sell?

While there are far too many factors to list here, one thing you should always consider is that a strong management team can have a positive effect on your business’ valuation, and ensure it can grow and succeed following an acquisition.

All in all, Dan and Doug’s discussion showed that the work we’re doing to grow our group and the companies that are part of it is paying off, and that there are opportunities in store for anyone flexible enough to form the right long-term strategy.