Yea there is a significant cut. I do know they are exploring an imminent US dual class listing for Brett to get some personal capital. Furthermore there was the introduction of the revenue tied remuneration if you recall, which under the event of higher growth, will also grow his salary as well at the same pace.
I was always comfortable with the risk, the primary reason I took some off previously was due to valuation, which in the existence of the dividend did not meet my hurdle rate. With that cut the compound growth in EPS jumps from 15% to IMO >25-30% and meets my hurdle. The current multiple with recent acquired firms as well has to some extent been grown into.
It is by no means my largest position however, if there is one thing i have learned in my 3+ years as a shareholder it was that they do what they say and are remarkably consistent.
Hey Tristan - really appreciate your writing. Do you mind elaborating on why you don’t think KPG’s services are not all ‘that much better than a normal accounting firm’? My email is bwitmer@chesterholdingsllc.com if easier
KPG itself is the holding company of a part interest in Accounting firms. They don't run the firms themselves. Perhaps by design, the decentralisation means as an employee your experience may differ depending on the firm you are in. In the particular office I was in I felt no apparent difference to other firms I had worked at and been exposed to in the past, in the way it ran, the processes and software etc. The services team almost feels like a managed service provider with a bit extra on top (payroll and marketing, embedded partnership referrals to complementary in house services etc.).
But still, I found a inherent lack of automation used, standardised processes which made it feel 'normal'. Perhaps, that is just because the vendor was old enough to retire soon after it joined the group, and his long-running culture and processes persisted in that particular partnership. But these types of firms, by no surprise should be the best acquisitions, as they would typically have no modernisation and low margins, meaning huge potential accretion if you were to barter on a multiple of low margin earnings for example.
I really don't think organic growth is the primary driver here, and believe that perhaps acquisitions are done on the presumption of 'a long history' means 'a long future' which may well be the case, but it's not a small undertaking to hyper rationalise the firm post-succession, and that there, is probably the core of my frustration. I wanted my job to be as easy as it possibly could, on the cutting edge of modern software and processes, but due to the old vendor and his habits, it felt like a chore more often than not.
Hope this makes sense, it's a great strategy to buy old firms and modernise them, but I wonder how long you can do this sort of thing... eventually you'll be buying already efficient firms and there's nothing left to rightsize.
Is BK hinting at buying back shares since the dividend is essentially going to be cut going forward? Or continue acquiring…
More M&A
That’s a significant hit to his income cutting the div, must be confident...any word on US expansion? I.e are you more comfortable with the risk now?
Yea there is a significant cut. I do know they are exploring an imminent US dual class listing for Brett to get some personal capital. Furthermore there was the introduction of the revenue tied remuneration if you recall, which under the event of higher growth, will also grow his salary as well at the same pace.
I was always comfortable with the risk, the primary reason I took some off previously was due to valuation, which in the existence of the dividend did not meet my hurdle rate. With that cut the compound growth in EPS jumps from 15% to IMO >25-30% and meets my hurdle. The current multiple with recent acquired firms as well has to some extent been grown into.
It is by no means my largest position however, if there is one thing i have learned in my 3+ years as a shareholder it was that they do what they say and are remarkably consistent.
Hey Tristan - really appreciate your writing. Do you mind elaborating on why you don’t think KPG’s services are not all ‘that much better than a normal accounting firm’? My email is bwitmer@chesterholdingsllc.com if easier
Thanks!
Hi Bwitmer,
Thanks, happy to hear that.
KPG itself is the holding company of a part interest in Accounting firms. They don't run the firms themselves. Perhaps by design, the decentralisation means as an employee your experience may differ depending on the firm you are in. In the particular office I was in I felt no apparent difference to other firms I had worked at and been exposed to in the past, in the way it ran, the processes and software etc. The services team almost feels like a managed service provider with a bit extra on top (payroll and marketing, embedded partnership referrals to complementary in house services etc.).
But still, I found a inherent lack of automation used, standardised processes which made it feel 'normal'. Perhaps, that is just because the vendor was old enough to retire soon after it joined the group, and his long-running culture and processes persisted in that particular partnership. But these types of firms, by no surprise should be the best acquisitions, as they would typically have no modernisation and low margins, meaning huge potential accretion if you were to barter on a multiple of low margin earnings for example.
I really don't think organic growth is the primary driver here, and believe that perhaps acquisitions are done on the presumption of 'a long history' means 'a long future' which may well be the case, but it's not a small undertaking to hyper rationalise the firm post-succession, and that there, is probably the core of my frustration. I wanted my job to be as easy as it possibly could, on the cutting edge of modern software and processes, but due to the old vendor and his habits, it felt like a chore more often than not.
Hope this makes sense, it's a great strategy to buy old firms and modernise them, but I wonder how long you can do this sort of thing... eventually you'll be buying already efficient firms and there's nothing left to rightsize.