Riccardo Segat, co-founder of investment boutique Amplio Partners, on increasing value in a tricky market and keeping key personnel
Riccardo Segat, co-founder of investment boutique Amplio Partners, on increasing value in a tricky market and keeping key personnel
My partner, Andrea Davi, and I set up Amplio Partners five years ago. In 2004, we closed our first deal, Amafilter, a manufacturer of filtration systems with operations in Holland, Germany and Eastern Europe. We did this deal partly because of Andrea’s background in industrial filters, but also because the business fell within a fragmented industry and offered great potential for sustainable growth and consolidation.
Amafilter was underperforming, so we were able to acquire the company at a reasonable price. We invested our own money, which we topped up with backing from individual investors.
One of the first things we did on completion was to replace the management team. As a result, we were able to transform a €2 million (£1.8 million) loss-making business into one that generated pre-tax profits of €2.2 million. Shortly after the first deal, we acquired Eurofilter, a major rival based in the UK and France, as a bolt-on, and our revenues swelled to €25 million.
Of course, that was back in 2004,when there were fewer constraints on finance. We wouldn’t expect the rate of organic growth that we got from Amafilter now, but we would still expect to build businesses and increase their value.
In September, we sold Amafilter to German automotive company Mahle. We still managed to multiply our investment several times over in a very difficult market.
I wouldn’t describe Amplio as a typical investor. We invest our own cash and have a hands-on approach. We don’t have a portfolio of companies because we only have the resources to focus on two or three companies at a time. For this reason, we are involved at every stage of the integration process. I would say that integrating engineering facilities and operation processes is relatively easy, on paper at least. The technology is readily available, and if the team has the right skills, most technical problems can be solved without breaking a sweat. The biggest risk in making an acquisition is not retaining key people. It is very important to ensure that the management teams are able to work together and achieve shared goals.
If you take a long-term view, there has never been a better time to acquire. Valuations have been adjusted and it is likely that they can only go up from now on.
