Over the past years, Flokk has grown into Europe's leading manufacturer of high-quality seating solutions, partly through acquisitions. In this interview, CEO Lars. I. Røiri and Jonas Allers Wismer, Senior Vice President in charge of M&A, explain what Flokk looks for in potential acquisitions.
Since 2014, Flokk has made seven acquisitions, increasing the number of brands under the Flokk umbrella from three to ten. During the period, Flokk's annual revenue was approximately trebled to about EUR 325 million last year.
Flokk's latest acquisition occurred this spring, as Connection of the UK joined the Flokk house of brands.
While Connection is the latest Flokk acquisition, it is unlikely to be the last.
"More acquisitions are clearly in the cards. This industry is still very fragmented. In Europe, the ten biggest share about 35 per cent of the market, followed by a lot of smaller companies," says Røiri.
So, what will Flokk be looking for when scouting for future acquisitions?
"The rationale varies from deal to deal. Sometimes it's about increased distribution and entering new geographies; sometimes it's about completing our offering as we move from a niche player to a total seating solution provider; sometimes it's about backend synergies, within production or supply chain," says Wismer.
However, some factors are valid for all transactions, explains Røiri:
• Management: "We look for well-managed and profitable companies. Management has to be strong and committed to working with us. If management is on the way out, that's a no-go for us."
• Brand: "The brand must be strong. We're not interested in generic white-label producers competing only on price."
• Design: "There has to be a design thinking there. There's a lot more focus on strong design today than before. This is key to Flokk and the firms we want to acquire.".
• Distribution: "Most sales are done through dealers, and the relationships between dealers and local producers tend to be very sticky, so this is important to us. Acquisitions give us access to the dealer network and the opportunity to sell other brands through the same network."
Flokk's recent acquisitions have been in Europe and the USA, and this is likely to continue. More than 250 companies are identified as attractive targets, and the team is constantly working on analysing and selecting which cases to convert to prioritised opportunities.
"At this time, we're primarily looking at Europe and the US. In terms of segments, flexible office solutions, home offices, cross-over between consumer and office - those are interesting areas that we look at," says Wismer.
Røiri and Wismer stress the advantages offered to customers. "We become a better partner for our customers, with a broader offering. We also make the production more efficient, benefitting customers, and we are a leader in sustainable and circular solutions, which is becoming increasingly important to our customers," says Røiri.
Røiri and Wismer stress the importance of personal communication.
"Many of these companies are family-owned. The company is the baby of the founders. We tried using brokers to scout out deals for us. That gave zero results. We have to talk to them directly," says Wismer.
"Then we have to convince the owners that Flokk provides a good home for their companies, and we have to convince management that they have an even better future within the Flokk group, as our size gives access to deep competence within product development, circular design, supply chain and manufacturing. In short, these already well-run companies can become even better within the Flokk group," says Røiri.
"Generally, there is also a positive view of Scandinavian business culture and management style, based on trust and transparency. This is a competitive advantage for us in these processes," Røiri adds.
However, identifying targets and convincing owners to sell is only part of the job. Integration is where a lot of mergers and acquisitions fail.
"We move quickly and make the plan clear to everyone, meet with management and ensure they are all 100 per cent on board. They have to be all-in or find something else to do. Then we set up a dedicated integration organisation with members from both sides and start the integration process immediately. You can't manage acquired companies through board representation. You have to get in there, integrate functions and do projects together," says Røiri.
"There is strength in having done this several times. We have actually gotten quite good at it," concludes Wismer.
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