SDI Group: High-ROTCE UK Serial Acquirer of Scientific Instruments

Nils Herzing of Shareholder Value Beteiligungen AG presented his investment thesis on SDI Group (UK: SDI) at European Investing Summit 2024.

Thesis summary:

SDI, founded in 1984 and AIM-listed in 2008, is a micro-cap UK serial acquirer of manufacturers of scientific instruments and components. The company operates through 14 subsidiaries. These are high-margin businesses with medium-wide moats. The operating businesses are largely independent of the economic cycle due to life sciences end-markets.

The group typically acquires small businesses with EBIT of roughly £1 million for 5-6x EV/EBIT. Since 2014, SDI has acquired 17 companies for an average multiple of 5.5x. Going forward, SDI plans to acquire 1-2 companies per year, and with this aims to grow revenue inorganically by 10% per annum.

The opportunity exists due to the recent departure of Mike Creedon, missteps in their recent M&A transactions, which were conducted by Mike, as well as the fade-out of profitable COVID-19 revenue.

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About the instructor:

Nils Herzing is an Executive at Shareholder Value Beteiligungen AG (SVB), a long-term oriented, publicly traded value investment vehicle. Prior to joining SVB, Nils was Partner and first employee at Active Ownership Capital (AOC). Before that, he was the manager of a Family Office located in Regensburg, Germany. In 2013, he graduated with a B.A. in Management, Philosophy & Art. In the same year he founded the Herzing Value Investment GmbH. Afterwards, he earned an MSc in Finance from the EBS Business School and EDHEC Business School during which he passed the first two levels of the CFA Program. Since 2016, he has been a CFA Charterholder. In 2017, Nils co-founded ForkOn GmbH, the first vendor neutral SaaS forklift fleet management solution. From 2018 until 2022, he has severed as a board member of the supervisory board of PBKM (Polski Bank Komórek Macierzystych) S.A. and Vita 34 AG.