n Industries – Thesis Summary
n Industries plans to actively apply the decentralized serial acquirer playbook to small, niche UK industrials that purvey mission-critical products. The businesses they will acquire earn excellent unit economics, with recurring revenue ~70% and gross revenue churn ~3-4%.
We believe n Industries can pay 4x-6x EBITDA (6x-7x EBIT) to roll up the extremely fragmented market and earn 30%-55% levered IRRs assuming no multiple expansion. The base rates of success for similar decentralized industrial serial acquirers are notably high.
Valuation & Deal Particulars
- Post-money valuation: £20.2mm.
- 10-Year Net IRR: 30% (assuming an exit multiple of 10x EBITDA) with a Net MOIC of 13.8x.
- 5-Year Net IRR: 56.8% (assuming an exit multiple of 7x EBITDA) with a Net MOIC of 9.5x.
The offering values n Industrials at 5.25x expected EBITDA, which is highly attractive given that public peers currently trade for 15x-20x EBITDA. n Industries is a start-up serial acquirer participating in their first fundraising round (£20mm) post-seed. They will operate their acquired businesses in a decentralized manner with lean HQ operations, and plan to IPO around Year 6 (2030).
Market Analogs
Many European niche industrial serial acquirers have proven to be impressive compounders over the years. Some successful examples include:
- Lagercrantz (Sweden): Generated a 23% total annualized shareholder return (20,674x MOIC) since 1976.
- Halma (UK): Generated 16% per annum returns since 1977 for an MOIC of 1,086x.
- Judges Scientific (UK): Has been a 100-bagger since 2003, driven by 23% annualized EPS growth for 20 years.
- Lifco (Sweden): Has generated a 12.7x MOIC since its IPO 10 years ago (29% IRR).
These companies generate consistent, strong FCF margins and typically target highly fragmented market niches that are <£100mm in size, ensuring large OEMs don’t try to compete.
Unit Economics
The revenue size of the firms that n Industries is targeting is very small (£2-15mm), allowing for low purchase multiples and less competition for deals. Management expects that 70-80% of its acquisitions will be of firms providing products with a long lifespan, leading to overall recurring revenue of ~70%.
Expected levered IRRs are ~30%-55% for a typical acquisition if you assume n Industries sells the acquired company after 5 or 10 years. We also expect ROTC for acquired firms to be in the range of 30% upon acquisition, with the potential to improve to 40%+ through revenue growth and working capital efficiencies.
Exceptional Management Team
The company is led by Jonathan Bates-Kawachi, the CEO and primary founder, alongside two Senior Founding Partners, Duncan Penny and Paul Simmons. Jonathan has over 13 years of experience investing in industrial businesses and an exceptional track record. Paul Simmons brings critical operational experience, having formerly led the Infrastructure and Process Safety Sectors at Halma, comprising half of Halma’s revenue.
Capital Allocation Strategy
The intention of n Industries is to hold acquired companies forever, thinking like permanent owners. The Board, which includes major investors, will make the final decision on acquisitions to ensure disciplined capital allocation.
